Ashanti boosts profit but costs rise

African miner Ashanti Goldfields Co Ltd (ASL) on Tuesday reported a near-doubling of third quarter profit but the result, flattered by lower financing charges, masked falling production and rising costs.

The Ghanaian miner posted a 93 percent jump in earnings to $14.5 million for the three months ended September 30, but total output fell to 411,532 ounces at a cash operating cost of $189 per ounce, up from $181 a year earlier.

Ashanti, which nearly collapsed in 1999 due to heavy losses on its hedge book, also fetched a higher realised gold price in the quarter of $331 per ounce, up from $327 a year earlier.

It attributed the lower production to the start of a planned closure of its Ayanfuri mine in Ghana, and said it was on track to meet its annual production target of 1.6 million ounces.

The hedge book, which had plunged the company into huge losses after a sudden spike in the gold price two years ago, was in the black at September 30 to the tune of $41 million, based on a spot gold price of $291 per ounce.

Ashanti said the sharply higher profits reflected a good operating performance from its new Geita mine in Tanzania and lower depreciation and interest charges. Ashanti, which has been paying down debt, said it was reviewing its refinancing options and had begun talks with holders of its convertible notes.

Geita, East Africa's biggest gold mine, is owned 50-50 by Ashanti and AngloGold (ANGJ). The mine produced 143,116 ounces of gold in the quarter, up from 75,036 ounces a year earlier, but cash costs rose to $140 per ounce from $131.

Ashanti's American Depositary Receipts have surged 73 percent this year, outperforming its big international rivals by about 26 percent. But the stock, which closed in New York on Monday at $3.24, is well off its old trading range of around $10 before the hedge book brought it to its knees in late 1999.