GLOBAL gold producer AngloGold Ashanti was aggressively seeking ways to compensate for its expected production decline at current operations after four to five years, chief operating officer for Africa Neville Nicolau said on Friday.

Speaking during a conference call on the group’s March quarterly results, he said projects under consideration included deepening Moab Khotsong and Mponeng, accessing the shaft pillar at Great Noligwa and extending Kopanang to the west and southeast.

Asked whether AngloGold’s future South African production would stabilise or decline as grades fell, CEO Bobby Godsell said the current gold price of R150 000/kg, which he had not seen in his 20 years in the industry, had encouraged the group to consider growth projects.

But these projects would extend the life of existing operations into the future, rather than increase levels of production.

Group production in the March quarter was 10% down at 1,33-million ounces compared with the December quarter’s, in line with previous management guidance, as a result of shifts lost in SA and Mali during the Christmas break.

Total cash costs rose 7% to $332/oz, which was higher than expected, because of lower gold production and a fall in by-product revenue, particularly from uranium, Godsell said on Friday.

But the group’s bottom-line profit benefited in comparison with that of the December quarter when it made various once-off accounting adjustments, including costing its employee share scheme and making provision for taxes.

The current quarter was also boosted by a higher gold price.

Headline earnings for the March quarter, excluding the nonrealised loss on AngloGold’s hedge book, rose to 249c a share from 124c in December.

Gold Fields, SA’s second-biggest gold producer, recently reported a 3% decline in attributable production from all its operations to 989 000 ounces for the March quarter at a total cash cost of $399/oz. Harmony Gold, the country’s third-biggest producer, reported a 3,8% decline in gold production to 579 032 ounces at a total cash cost of $445/oz.

Nicolau said South African production had fallen 12% and total cash costs had risen 16%.

The main contributor to the increase in cash costs was lower uranium revenue because of problems experienced at the South Vaal uranium plant, SA’s only uranium processing operation. South Vaal was built in 1979 with a 20-25 year life, but the extended life of AngloGold’s uranium resources and positive market conditions encouraged the group to start a complete refurbishment two years ago.

While this was under way, production of uranium would be affected.

But from 2009 AngloGold’s uranium business would become a meaningful contributor to the group, Nicolau said.

There would be higher volumes of production from Moab Khotsong and improved efficiencies from the plant.

By 2009, long-term contracts at lower prices entered into with utilities would be rolled over at better prices.

AngloGold’s uranium reserves were 25,9-million pounds, and its resources were 128,6-million pounds, which was a significant inventory.

On top of that, AngloGold also has a 50% stake in uranium trader Nufcor, which has its own uranium inventory.

Outside SA, AngloGold’s Obuasi in Ghana and Yatela in Mali grew production and its Cerro Vanguardia mine in Argentina posted a particularly strong quarter with production up 21% in line with the mining plan.

Godsell said AngloGold’s production for the June quarter was expected to be 1,39-million ounces of gold at an average total cash cost of $325/oz.

For the full year, the cash cost estimate has been raised by $11/oz to $320/oz, assuming local currencies will be stronger and royalty prices higher because of the more positive gold price outlook.

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