Anglogold Ashanti Plc Q2 FY2020 earnings call

Management Statement and Operational Highlights

• COVID-19 Impact: The pandemic caused temporary stoppages at some assets, but most are now back to near-normal production. COVID-19-related stoppages impacted about 85,000 ounces of production in H1, predominantly in South Africa.
• Production Performance: The Company delivered solid production, with improvement quarter-on-quarter at Sunrise Dam, Siguiri, and Cerro Vanguardia. Obuasi redevelopment project ramped up, with a 63% quarter-on-quarter increase in production despite COVID-19 delays.
• Financials: Cash flow was robust, with free cash flow before growth capital quadrupling year-on-year to $324 million. Net debt fell 18% year-on-year to $1.43 billion, and net debt-to-EBITDA was 0.67 times. All-in sustaining costs rose 3% year-on-year to $1,031 per ounce, with $52 per ounce related to COVID-19 impacts.
• ESG: Emphasized effective ESG practices, including support during the global fight against COVID-19.

Segment Performance

• Continental Africa: Produced 773,000 ounces in the first half of 2020 at an all-in sustaining cost of $865 per ounce. This compares to 711,000 ounces at $932 per ounce in the first half of 2019. The region generated free cash flow of $266 million during the period.
• South Africa: Produced 146,000 ounces in the first half of 2020 at an all-in sustaining cost of $1,279 per ounce. Production was lower year-on-year due to COVID-19-related lockdown regulations, but the region generated about $35 million in free cash flow.
• International Operations: Americas (Geita, Serra Grande, etc.) and Australia (Tropicana, Sunrise Dam) had varying production and cost figures, with impacts from COVID-19 and operational challenges. For example, AGA Mineracao in Brazil was 30% lower year-on-year, while Serra Grande saw production increase 50% quarter-on-quarter.

Guidance

• Production Impact: Expect another 40,000 ounce impact in H2 2020 from COVID-19, with commensurate effect on costs.
• Capital Expenditure: Growth capital for the year remains between $280 million and $320 million, with $262 million for Obuasi redevelopment project.
• Dividend: Dividend expected to increase based on 10% of free cash flow pre-growth capital, driven by strong gold price and deleveraging. The Board is discussing potential incremental dividend increase.

Risks

• COVID-19 Disruptions: COVID-19-related stoppages impacted about 85,000 ounces of production in H1, predominantly in South Africa. Uncertainty remains around the medium-term severity of the pandemic and host government measures.
• Asset Sales and Cash Lock-up: Delays in closing asset sales (South African assets and Sadiola) and cash lock-up in DRC and Tanzania pose risks to liquidity and financial metrics.

Question and Answer

• Q: About special dividend, South Africa asset sale, and cost of converting resources to reserves.

A: Dividend is under Board discussion with focus on prudence; South Africa asset sale is in final stages with government cooperation; cost of converting resources to reserve is approximately $35-$40 per ounce.

• Q: Clarification on locked-up cash.

A: $293 million in Kibali cash, $131 million VAT in Tanzania, $71 million VAT in DRC; Barrick is working on releasing DRC cash with government engagement.

• Q: Strategy shift with CEO change.

A: Focus on business continuity during COVID-19; Board evaluating options like alternative listing but immediate focus is on navigating pandemic response; continuity in strategy execution is expected