JOHANNESBURG (miningweekly.com) – Production of 1.748-million ounces after strong second-quarter recovery has put AngloGold Ashanti virtually at the halfway mark to meet full year guidance, CEO Srinivasan Venkatakrishnan said on Monday in presenting the company’s half-year results that also saw full-year cost guidance remain intact.

All-in sustaining costs (AISC) of $1 071/oz for the 12 months to June 30 compared with $911/oz in the corresponding period of last year reflected planned brownfield investment and stronger currencies, which were up 14% in both South Africa and Brazil.

The adjusted headline loss of $93-million includes retrenchment provision of $47-million and a silicosis provision of $46-million.

Free cash outflow totalled $161-million, with working-capital lockups a continued challenge, Venkatakrishnan reported at a media roundtable in which Creamer Media’s Mining Weekly Online took part.

Brownfield projects to improve life and portfolio mix are all on budget and on schedule.

The company reported that decisive action was being taken to stem losses in South Africa, with restructuring talks under way.

Meanwhile, the third consecutive fatality-free quarter was achieved, with new safety records set across the portfolio.

The company reported net debt of $2.151-billion and a net debt to earnings ratio of 1.56 times.

The execution of its slate of high-return projects with relatively low capital expenditure (capex) and attractive payback periods will become the next source of improved cash flows and portfolio quality enhancements, Venkatakrishnan told Mining Weekly Online.

“We continue to focus on our long-term strategy of improving the underlying quality of our portfolio through investment in high-return projects and removal of lossmaking ounces,” he said.

Lower grades and the slow production start to the year from the South African operations were offset by another strong performance from the international operations, with a notable improvement from Siguiri in Guinea, where higher grades helped drive a 25% increase in production.

The stronger South African rand and Brazilian real continued to weigh on margins, while the planned increase in capex on the brownfield project portfolio also contributed to the higher AISC.

The rand and real were both 14% stronger versus the dollar in the first half of 2017 compared with the first half of last year, while the gold price was only 1% higher.

AISC increased by $160/oz, or 18%, from $911/oz in the six months of the corresponding period last year to $1 071/oz.

Nonetheless, work is continuing across the portfolio to assess opportunities to prioritise capital spend across the group.

Cash inflow from operating activities decreased by $155-million, or 33%, from $476-million to $321-million, reflecting higher operating costs and negative working capital movements, partially offset by a 1% increase in the gold price and a 2% increase in gold sales.

The lockup of value-added-tax receivables in certain jurisdictions in continental Africa hampered free cash flow generation.

An adjusted headline loss of 23c a share was recorded in the first half of 2017, reflecting the South Africa redundancy provisions related to potential outcome of the Section 189 process, and an estimated provision in respect of the silicosis class-action lawsuit.