AngloGold Ashanti Ltd. (ANG), the third- largest producer of the metal, is looking to boost output in the three months through September to mitigate an expected increase in costs, mainly in South Africa.
Power-tariff advances in the continent’s biggest economy and wages are “hitting the numbers,” Chief Executive Officer Mark Cutifani told reporters today on a call from Johannesburg, where the company is based. “We are hoping to do better on the production side to partially offset that.”
Costs may rise to as much as $865 an ounce in the third quarter from $801 in the second, the company said. Second- quarter output was 1.073 million ounces and third-quarter production may be from 1.07 million to 1.1 million ounces, it company said.
The company and rivals including Gold Fields Ltd. (GFI) and Harmony Gold Mining Co. are trying to boost output to cope with the effects of rising costs and to benefit from prices that have increased for 11 straight years.
The metal may trade through $1,700 an ounce in the second half, Cutifani told reporters.
“The winds are all starting to turn favorable for gold,” he said. “The Europeans still haven’t come to grips with the challenges they’re facing. The U.S. is coming into an election period -- certainly some uncertainty. In China, demand still looks strong.”
Gold increased 0.7 percent to $1,614 an ounce by 4:51 p.m. in London. The metal has gained 3 percent this year.
Earnings excluding one-time items fell 41 percent in the second quarter from the first as expenditures including exploration increased and a higher tax charge was recorded. Profit on that basis declined to $253 million, or 65 cents a share, from $429 million, or $1.11, in the prior quarter, the company said today in a statement. A $90 million first-quarter tax credit wasn’t repeated.
AngloGold climbed 1.5 percent to 281.76 rand by the 5 p.m. close in Johannesburg, the second-biggest gain in the five- member FTSE/JSE Africa Gold Mining (JGOLD) Index today.
“AngloGold is our preferred pick in the South African gold sector,” Citigroup Inc. analysts Johann Steyn and Craig Irwin said in an e-mailed note today. “We view its existing operations and project pipeline as superior to that of its peers, and also think it has less execution risk.”
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