Gold mining giant AngloGold Ashanti reports 376% rise in free cash flow amid surging gold prices

AFRICAAngloGold Ashanti, one of the largest gold mining companies operating in Africa has posted a colossal surge in half-year free cash flow generation as prices of gold continued to rise buoyed by increased demand.

According to a report by Mining Weekly, AngloGold Ashanti’s free cash flow before growth capital, the metric on which dividends are calculated, rose 376% to $324-million in the first half of 2020, compared with $68-million for the same period last year.

Compared with an outflow of $31-million in the same period last year, the Johannesburg- and New York-listed company totally weathered the Covid-disruption with $173-million worth of second-quarter free cash generation.

“The business is in excellent shape and cash flows are extremely robust, demonstrating the significant operating leverage we have to this strong gold price,” outgoing AngloGold CEO Kelvin Dushnisky stated in a release to Mining Weekly.

AngloGold reported a reduction in production costs during the first half of 2020.

The mineral company in the six months ended June 30 produced 1.469-million ounces at a total cash cost per ounce of $810/oz, compared to 1.554-million ounces at $792/oz for the same period last year.

The company also recorded a slight decrease in all-in sustaining costs (AISC) which fell to $1 031/oz for the first six months of 2020, compared with an AISC of $1 002/oz for the corresponding period last year.

AngloGold reported that the adverse impacts of Covid-19 on production in the first half of the year was limited to an estimated 85 000 oz, of which 63 000 oz related to the South African operations.

Second-quarter production however, increased 5% over the first quarter of 2020, rising to 753 000 oz from 716 000 oz.

Quarter-on-quarter production improvements were recorded at Sunrise Dam, Serra Grande, Iduapriem, Obuasi, Geita, Siguiri and Cerro Vanguardia (CVSA).

Adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) for the first six months of the year increased by 59% to US$1.096-billion compared with US$689-million during the first half of last year.

This rise in income was largely helped by a 26% year-on-year increase in the gold price received and weaker local currency impacts.

AngloGold said that its balance sheet continued to improve as stronger cash flows helped with the continued reduction in debt.

The ratio of adjusted net debt to adjusted Ebitda at June 30 was 0.67 times, well below the targeted level of 1.0 times through the cycle while adjusted net debt decreased by 18% to $1.428-billion from $1.739-billion last year.

To safeguard the balance sheet during Covid, AngloGold took steps to bolster liquidity, with $2.47-billion available as at June 30, including cash and cash equivalents of $1.29-billion.

AngloGold Ashanti’s impressive performance comes even as its current CEO Kelvin Dushnisky is poised to step down as CEO and executive director as of September 1.

The Company’s current CFO Christine Ramon is expected to succeed Dushnisky as interim CEO while Dushnisky would remain in Toronto, and be available until February 28 next year to assist with a smooth handover.

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