World no.3 gold producer AngloGold Ashanti is set to report a solid third-quarter result tied to record gold prices for the September quarter, Chief Executive Mark Cutifani said on Thursday.
“We’ve had the best ever gold price last quarter. It will be a solid outcome again,” Cutifani told Reuters in an interview on the sidelines of the Commonwealth Business Forum in Perth.
“People will see that we’re continuing to do very well in terms of margins and cashflow.”
Despite record earnings in the first two quarters of this year after it closed out its hedge book, the company’s shares have under performed its peers, while all gold companies’ shares have lagged the sharp gains in the gold price.
Cutifani said three factors were weighing on its share price: a nationalisation debate in South Africa, a lack of a track record of strong earnings and cashflow, and investor demands for the company to return some of its strong cashflow in higher dividends.
“I think it’ll take somewhere between six or seven quarters of continuous good performance, cashflow, demonstrating our leverage to the gold price before we get real credit,” Cutifani said.
He said the company would address the dividend question at its third-quarter results in November.
“The dividend conversation is alive and well….We will answer many questions and we’ll continue to show the leverage we’ve now got.”
With gold miners’ share prices failing to match soaring gold prices, Cutifani said some small- to mid-cap miners were looking cheap as potential takeover targets.
“We will look for value, but not at any price,” he said. “We’ll go where the gold is. There’s no no-go regions.”
He remained bullish on gold prices even after euro zone leaders reached agreement on how to solve the sovereign debt crisis which has been helping to drive demand for gold.
He has been predicting that gold prices could reach $2,200 an ounce and stuck to that outlook on Thursday, but said it might just take a bit longer now to get there.
“I certainly believe we’ll see that within two to three years and that’s based on fundamentals — supply, demand and the costs of producing,” Cutifani said.
He is optimistic that the debate raging in South Africa over nationalisation, as called for by the African National Congress’s youth wing, will not result in any major harm to the mining industry.
“I’ve got no doubt tax regimes will change in some way, shape or form, but I don’t think it’ll be anywhere as bad as people are anticipating in terms of the nationalisation debate,” he said.
“One thing the ANC has proven time and time again in the last 17 years is that they are fiscally a conservative organisation and they are concerned about the future of the country and the ability of the industry and the community to work.”
“For every 1 percent move we’ve seen in the gold price, we’ve seen a 2 pct improvement in earnings and a 3 percent improvement in cash flow,” he said.
AngloGold cut its full year production target to 4.45 million ounces in August, after rain slowed output at its Sunrise Dam mine in Australia and drought hit production at its Cripple Creek and Victor mines in the United States.
Cutifani said Sunrise Dam should be up and running fully again by Friday, when its open pit will start producing again.
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