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Safety halts eat into AngloGold's gold production
November 3, 2009
By Lucky Biyase and Bloomberg
AngloGold Ashanti had been left reeling by safety concerns after experiencing 30 full and 18 partial production losses in its South African operations in the third quarter, chief executive Mark Cutifani said yesterday.
"We are obviously disappointed and we are taking no chances," he said.
Four workers had died during the quarter in three separate accidents, two at Mponeng and one each at TauTona and Great Noligwa mines.
For the year, 86 full shifts and 43 partial shifts were lost, with the second quarter being the worst.
This had forced the firm to cut full-year guidance to between 4.7 million ounces and 4.8 million ounces for the year.
The stoppage at TauTona, caused by a length of steel falling down a shaft, was likely to last another two months while examinations of infrastructure and repairs were being done.
"The 12 percent decline in the lost time injury frequency rate in the first nine months of this year is an encouraging achievement and testament to our drive towards continued improvements to safety on our operations," said Cutifani.
"However, much work still needs to be done to eliminate these accidents altogether."
Rising labour costs, the weakening dollar against other currencies and electricity hikes were among the challenges faced by the world's third-biggest gold producer.
"We understand the predicament faced by the government, but the electricity hike of about 45 percent could have a serious profound impact on business."
The group also said it was worried by announcements that Eskom would petition the National Electricity Regulator of SA for further 45 percent annual rises until 2012 to fund the construction of new power generation capacity.
Costs in South Africa would rise by between 15 percent and 25 percent should Eskom get permission to treble tariffs in the next three years, Cutifani said. That is "not viable for the industry", he said, adding that it would affect production and employment.
AngloGold posted a third-quarter loss on the cost of reducing commitments to sell the metal below market prices.
The loss was R8.3 billion, compared with net income of R2.3bn in the preceding three months.
Cutifani has cut forward sales volumes by two-thirds to 4.3 million ounces since 2007, allowing the company to sell more gold at higher market prices. Forward sales committed the firm to selling the metal at prices below current levels.
In July, AngloGold spent $797 million (R6.3bn) to cut forward sales by 1.4 million ounces. Committed ounces will decline to about 4.1 million by the end of the year.
Gold is set for a ninth consecutive annual gain, having risen to a record $1 070.80 an ounce on October 14. The metal traded at an average $960 an ounce in the third quarter, a 4.1 percent increase from the preceding three months.
In July it cut its full-year production forecast to as much as 4.8 million ounces. Shares rose 3.52 percent to R300.10.
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