Business News of 2014-06-03

AngloGold Obuasi bites a final bullet

AngloGold Ashanti, Obuasi mine is temporarily halting its underground operations in a bid to restructure the troubled mine.
The mining giant is consequently retrenching its entire 4,300 workforce in a bid to save the loss-making mine from a complete closure.
The Senior Vice-President of AngloGold Ashanti, Mr Steve Marcombe, said on the sidelines of a workers’ durbar in Obuasi that “what will eventually replace the current underground operation is a mechanised mine with a skilled workforce”. “We need to reduce the cash-bleed rate. It is high at the current low prices," he added.
According to the senior vice president, the company plans to temporarily halt underground production for surface operations.
Mr Steve Marcombe said US$600m had been pumped into Obuasi from AngloGold Ashanti’s corporate funds which is US$500m more than what had been invested through funds generated by Obuasi itself.
"Obuasi is a challenging asset but technically it can be fixed. I think the softer, social issues were underestimated.
The company has 18 years of mine life left and company officials are hoping to focus on Sansu pit in the southern part of the Obuasi mine.
Officials of Africa's top gold producer said they would also cut exploration budget by more than half this year to focus on a few major projects and restructure the Obuasi mine in the Ashanti Region.
Mr Marcombe said the mining operator would deploy mechanised methods of operations in a mine which was over a century old and had long been a pillar of the industry in a country once called the Gold Coast.
AngloGold acquired Obuasi when it merged with the former Ashanti Goldfields to create AngloGold Ashanti under former CEO, Bobby Godsell.
But on condition of anonymity, a company official had told the Graphic Business that the restructuring of the mine, including the planned retrenchment, would cost AngloGold Ashanti US$220m.
The downsising of the workforce comes after the miner had pumped so much into the operations of the company.
But Mr Marcombe said "The cash bleed from Obuasi was affordable when the gold price was between US$1,500 and US$1,700 an ounce. The collapse in the gold price has changed everything”.
"It consumed US$220 million in 2013. And it has consumed US$40 million to date," he added.
"We have spent six to nine months consulting the government and the wider range of stakeholders over what has to be done. We could have done this unilaterally as AngloGold, but we wanted to get everybody on board to work together. Production Numbers
The group reported a rise in its first-quarter earnings on Monday, compared to the same period last year as it cut costs and lifted production.
AngloGold said adjusted headline earnings for the first quarter totalling US$119 million (29 U.S. cents per share), compared to US$113 million in the same period last year.
Total cash costs for the quarter fell 14 per cent to US$770 an ounce from the first quarter of 2013, as new, low-cost projects came on line in places such as the Democratic Republic of Congo.
Output for the quarter fell to 1.06 million ounces from around 1.3 million ounces in the previous quarter. But year-on-year output rose 17 per cent, as operations outside of South Africa ramped up.