Anglogold Ashanti Plc Q4 FY2020 earnings call

Management Statement and Operational Highlights

• Safety: Achieved an all injury frequency rate of 1.68, the lowest ever. Focus on zero harm with an updated safety strategy and continued investment in understanding accident root causes. COVID-19 response included healthcare support and vaccination drive assistance.
• Financial Performance: Headline earnings were $1 billion, free cash flow before growth CapEx exceeded $1 billion. Dividend increased fivefold to $200 million. Net debt was at its lowest in a decade.
• Projects: Obuasi Phase 2 was 90% complete at year-end. Greenfield projects in Colombia were advanced. Ore reserves grew by 6.1 million ounces, extending the reserve life to 11 years.

Segment Performance

• African Operations: Gold production increased 4% year-on-year to 1.6 million ounces at a total cash cost of $757 per ounce. All-in sustaining cost was $935 per ounce. Free cash flow generated was $648 million. Geita produced 623,000 ounces, Kibali 364,000 ounces, Iduapriem 275,000 ounces, and Siguiri 214,000 ounces.
• International Operations: The Americas region produced 476,000 ounces, while the Australia region produced 553,000 ounces. All-in sustaining costs were lower due to managed cash costs, though impacted by COVID-19 in Argentina and Brazil, and travel restrictions in Australia.

Guidance

• Production: Expected an average 5% compound annual growth over 5 years. 2021 production guided to end between 2.7 million and 2.9 million ounces.
• Costs: All-in sustaining costs expected to be between $1,130 and $1,230 per ounce in 2021, normalizing to $160 to $200 per ounce by 2023.
• Capital Expenditure: Total capital expenditure for 2021 guided at $990 million to $1.114 billion, with sustaining capital expenditure at $720 million to $820 million.

Risks

• COVID-19: Ongoing impact on operations, workforce, and communities with unpredictable further waves.
• Regulatory: Compliance costs, particularly tailings storage facility (TSF) in Brazil, and potential delays in project approvals.
• Currency and Gold Price: Sensitivity to gold price and currency fluctuations affecting cash flow.

Question and Answer

Q: On ore reserve development spend A: There is a continuous budget for ore reserve development, with increased spend in the next 2 years due to asset life and requirements, normalizing from 2023.

Q: Obuasi guidance A: Production expected to be 250-300k ounces in 2021, ramping up to 350-450k ounces with all-in sustaining costs in the range of 725-825.

Q: Cash locked in DRC and Tanzania A: $424 million in cash is locked in the DRC, with VAT receivable in Tanzania. Cash expected in March, planned to be used for dividends and growth projects.

Q: Colombia projects A: Gramalote and Quebradona projects have capital spend ranges of $900M-$1B and $1.2B-$1.4B respectively, phased over 2-4 years with project financing and offtake agreements considered.