AngloGold Ashanti Ltd. dropped as much as 12% after the company cut its production forecast and said a key mine in Ghana may not resume production this year after an accident in May.
AngloGold lowered its output goal by about 12% on Friday after removing planned gold from the Obuasi operation. Mining activities at the project will remain suspended pending the conclusion of a third-party review of the mining and ground management plans.
The Johannesburg-based producer has underperformed rivals in the past year after the accident at Obuasi, where it had been ramping up production after investing $545 million to redevelop the operation. The company also spent nearly a year looking for a new chief executive officer after announcing Kelvin Dushnisky’s departure after just two years.
“Obuasi was going to be quite a big contribution this year,” interim Chief Executive Officer Christine Ramon said on a call. “We can’t predict at this stage if there will be production by the end of the year.”
AngloGold announced last month that former BHP Group executive Alberto Calderon will take the helm from Sept. 1, with Ramon returning to her post as CFO. In addition to the troubles at Obuasi, the new boss will be faced with rising costs eating into the company’s profit margins expenses surged 33% in the six months through June from a year earlier and an ongoing battle to repatriate profits from its Kibali mine in Democratic Republic of Congo and tax repayments from the government of Tanzania.
While AngloGold said it expects to see a solution soon to the profits locked up in Congo, Ramon declined to give exact timing when the government would release the funds.
The company, which emerged from a mining empire created by Ernest Oppenheimer a century ago, sold its remaining South African operations last year to focus on more profitable mines elsewhere in Africa, Australia and the Americas.
AngloGold said net income declined 5.2% to $362 million in the six months through June because of the production setbacks at Obuasi. The company declared an interim dividend the first since 2013 of 6 cents a share. The lower output doesn’t affect AngloGold’s ability to pay a full year dividend, she said.
AngloGold’s interim payout may “underwhelm versus market expectations” given its constrained free cash-flow, RMB Morgan Stanley analysts said. AngloGold raised payouts fivefold to 48 cents a share last year.
