AngloGold Ashanti Plc Q2 FY2026 earnings call

• Safety and Incident Response: The company reported a tragic fatality at Obuasi in April 2026, leading to a two-week full operational suspension for a thorough safety investigation. The company is implementing permanent corrective measures to prevent recurrence and remains committed to ongoing investments to improve long-term safety performance. Obuasi is currently operating at a normalized run rate without its KMS shaft, with a new ore pass expected to be completed by Q4 2026.\n- Operational and Cost Performance: Across the industry, persistent macroeconomic headwinds including broad inflation, a 45% spike in Brent crude prices, local currency appreciation against the U.S. dollar, and higher gold price-linked royalties have driven industry-wide cost increases. AngloGold Ashanti’s Full Asset Potential program and rigorous operational discipline have consistently offset a large portion of these exogenous cost pressures, decoupling controllable costs from market headwinds to ensure the full benefit of elevated gold prices flows to the bottom line. Standout strong operational performances were recorded at Tropicana and Cuiaba in Q2 2026.\n- Capital Allocation and Shareholder Returns: The company follows a dividend policy with a base quarterly payout of $0.125 per share plus an annual true-up to bring total annual payouts to 50% of free cash flow, and has opted to deliver the true-up at the half-year to return cash to shareholders faster. The company retired $666 million of outstanding 2028 and 2030 bonds earlier this year, reducing long-term financing risk and improving strategic flexibility. Shareholders have approved a $2 billion open market share buyback program, which is currently awaiting final regulatory approval from the South African Reserve Bank. Excess cash beyond the $1 billion target buffer will be returned to shareholders via dividends and buybacks, with total capital returns expected to exceed 50% of free cash flow if gold prices hold at current elevated levels.\n- Growth Pipeline: The company’s core organic growth opportunities are low-capital, high-return brownfield expansions across existing operations, targeting 10% to 15% (300,000 to 450,000 ounces) of additional production from the 2025 baseline within the next three years. Key growth projects are located at Cuiaba, Geita, Siguiri, Obuasi, and Sukari, all with low capital requirements that are already partially funded through existing sustaining and growth capital budgets. The large Arthur project in Nevada, expected to become a major production center in the early 2030s, is advancing to a full feasibility study with drilling complete and reserve growth targeting 1 million+ additional ounces in 2026. Production growth is expected to start ramping up in 2027, with full incremental production achieved by 2029.\n- Portfolio Strategy: The company sold the small, management-intensive Serra Grande asset, but has no plans to divest existing Tier 2 assets in the current market environment. At current gold prices, Tier 2 assets are generating strong free cash flow, and many have upside potential to transition to Tier 1 status over time. The company currently operates 9 assets total, a footprint that is easily manageable by the executive team.

AngloGold Ashanti classifies its portfolio into two core asset segments: Tier 1 assets and Tier 2 assets. Tier 1 assets are the company's core growth and cash generation engine, accounting for over 70% of total production, holding approximately 80% of the company's total mineral reserves, and delivering an exceptional 71% cash margin. Tier 2 assets function as reliable cash generators, delivering a solid 58% cash margin while maintaining operational discipline and cost competitiveness. For the second quarter of 2026, overall group EBITDA increased 46% year-over-year to $2 billion, headline earnings rose 58% year-over-year to $1 billion, and cash generated from operations grew 49% year-over-year to $1.8 billion. Quarterly free cash flow increased 36% year-over-year to $727 million, and basic earnings per share rose 49% year-over-year to $1.97. Total group cash costs for Q2 2026 were $1,480 per ounce, a 21% increase from $1,226 per ounce in Q2 2025, almost entirely driven by exogenous macro factors. First half 2026 production (after stripping out the sale of Serra Grande) was stable year-over-year at approximately 1.5 million ounces, with just under $1 billion in total dividends declared for the first half. The company ended Q2 2026 with total liquidity of $4.2 billion and a net cash position of $991 million, a $1.3 billion positive swing from June 2025.

• Management reaffirms full year 2026 operational and financial guidance, underscoring the robustness of the company’s diversified portfolio.\n- Full year 2026 production is expected to be second half weighted, with a 6% production increase in H2 2026 compared to H1 2026, and the strongest production expected in Q4 2026. Obuasi is expected to produce 150,000 ounces in H2 2026, reaching an annualized run rate of 300,000 ounces even while operating without the KMS shaft.\n- Cash costs are expected to decline in H2 2026 compared to H1 2026, driven by higher production volumes that spread fixed costs across a larger production base.\n- Cash taxes are expected to fall to $230 million to $250 million in both Q3 2026 and Q4 2026, less than half of the $542 million recorded in Q2 2026, which was a seasonal peak that will not recur at the same level in the second half.\n- Capital intensity is expected to remain stable at current levels (approximately $480 per ounce) as the company delivers on its organic growth pipeline, with no material increase expected in coming years.\n- Full details of the company’s organic growth pipeline, including project-specific production and capital estimates, will be presented in Q3 2026.

• A fatal safety incident at Obuasi led to a two-week operational suspension and ongoing operational constraints, as the mine is currently operating without its KMS shaft and damaged ore pass system. A replacement ore pass is not expected to be completed until Q4 2026.\n- Exogenous macroeconomic headwinds including persistent broad inflation, a 45% spike in global Brent crude prices, local currency appreciation against the U.S. dollar, and higher royalties tied to elevated gold prices have driven significant industry-wide cost increases.\n- Geopolitical instability in the Middle East presents potential risks to global energy prices and supply chains, which the company is actively monitoring to mitigate impacts.\n- The Guinean government has introduced a new requirement that gold from Siguiri must be processed through a local state-owned refinery, which is still being negotiated with authorities.\n- Iduapriem faced a material quarterly cash cost increase in Q2 2026 driven by a royalty rate increase from the Ghanaian government, though this impact is partially offset by a reduction in the existing COVID levy and is expected to be less impactful going forward.\n- The $2 billion share buyback program is currently pending final regulatory approval from the South African Reserve Bank, with an unclear timeline for authorization.\n- Generative and agentic AI deployment carries unresolvable data security risks for the company, leading to a cautious approach to broader adoption of new AI tools.\n- Operational issues including temporary flooding at Iduapriem have restricted access to higher-grade ore zones, leading to expected moderate production declines at the asset in the near term.\n- Lower-grade open pit mining is expected at Tropicana in the Havana 6 pit, leading to anticipated moderate production declines at the asset in the near term.

Q: Now that the $2 billion share buyback program has been approved by shareholders, what is the planned execution approach, and does management intend to complete the full program if market conditions allow? / A: The program still requires final regulatory approval from the South African Reserve Bank, which is still pending. Once approved, buybacks will be executed opportunistically, with purchases skewed toward periods of share price downside rather than consistent fixed buying. Management intends to complete the full program all else equal, pending regulatory approval.\n\nQ: What is the capital requirement for the 300,000 to 450,000 ounces of planned incremental organic production over the next three years, and will capital intensity increase? / A: Full project-level capital details will be shared in Q3 2026, but these are all low-capital brownfield expansion projects that rely mostly on additional mining activity and modest equipment purchases rather than large-scale new processing infrastructure. The company expects overall sustaining and total capital intensity to remain stable at the current level of ~$480 per ounce, with no material increase as production grows. Most of the required capital spending is already included in current capital budgets.\n\nQ: Obuasi has faced repeated operational delays and issues over the past several years. Do the recent issues (fatality, ore pass failure) permanently risk the planned ramp-up at the asset? / A: The primary recent disruption was the April 2026 fatality, which forced a two-week shutdown and required major safety modifications to the mine’s ore pass system. Before the incident, Obuasi was on track to hit its full year 2026 target of 300,000 to 350,000 ounces. A replacement ore pass will be completed in Q4 2026, and the mine is already on track to produce 150,000 ounces in H2 2026 (an annualized 300,000 ounces) while operating without the KMS shaft, with full normal operations and planned 2027 production of 325,000 to 350,000 ounces still on track.\n\nQ: What is the company’s view on retaining Tier 2 assets in the portfolio, which have a higher cost structure than the Tier 1 portfolio? Would a pure Tier 1 portfolio deserve a higher valuation? / A: The company previously attempted to sell one Tier 2 asset but found that buyer offers relied on overly conservative long-term gold price assumptions that did not reflect the asset’s current value at today’s elevated gold prices. Existing Tier 2 assets are currently generating very strong free cash flow: the previously targeted for sale asset is on track to generate 60% of its expected sale price in annual free cash flow this year. Many Tier 2 assets also have upside potential to transition to Tier 1 status as they expand, so management is in no rush to divest and is happy to retain all current Tier 2 assets aside from small, management-intensive assets like Serra Grande that were already sold.