AngloGold Ashanti (NYSE:AU) reported higher second-quarter earnings, cash flow and free cash flow as stronger gold prices more than offset inflation, fuel costs, currency effects and a temporary operational suspension at its Obuasi mine.
Chief Executive Officer Alberto Calderon said the company generated $2 billion in EBITDA during the quarter, up 46% from a year earlier, while headline earnings rose 58% to $1 billion. Chief Financial Officer Gillian Doran said basic earnings per share increased to $1.97 from $1.32 in the prior-year quarter.
Obuasi suspension affects production
Calderon opened the call by addressing a fatality at the Obuasi mine on April 24. AngloGold suspended operations for two weeks while it conducted an investigation and implemented measures intended to prevent a recurrence.
The suspension, along with the sale of Serra Grande, affected second-quarter production. However, Calderon said first-half production, excluding Serra Grande, was broadly stable year over year at about 1.5 million ounces. Tropicana and Cuiabá delivered what he described as strong performances.
Obuasi is operating at a normalized run rate, and the company expects second-half production from the mine of 150,000 ounces. Calderon said the mine is currently operating without the KM Shaft and certain ore passes following the incident, but management expects to restore normal operations and complete a replacement ore pass during the fourth quarter.
For the full portfolio, AngloGold reaffirmed its annual guidance and expects production to be weighted toward the second half, particularly the fourth quarter. Calderon said the company anticipates second-half production could rise about 6% from the first half if operations proceed as expected.
Production at Tropicana is expected to decline slightly as open-pit mining moves into the lower-grade Havana 6 pit. At Iduapriem, production has been affected by difficulty accessing temporarily flooded higher-grade areas.
Costs rise amid external pressures
Total cash costs increased 21% year over year to $1,480 per ounce in the second quarter, compared with $1,226 per ounce a year earlier. Doran said inflation, higher gold-price-linked royalties and foreign-exchange effects added about $216 per ounce, or 18%, to the company’s cost base. The Obuasi suspension added another $38 per ounce.
The company said a 45% increase in Brent crude prices increased energy costs across the portfolio, while a weaker U.S. dollar and strengthening local currencies created additional pressure. Doran said AngloGold’s internal realized inflation rate was just under 6%.
Management said it is seeking to offset those pressures through its Full Asset Potential program and a total-cost-of-ownership supply-chain framework. Calderon said the company’s controllable costs remained below inflation-adjusted levels, despite external cost increases and operational factors such as grade changes and mining farther from infrastructure.
At Iduapriem, Calderon said higher royalties were the primary reason for the quarter-over-quarter cost increase. He added that a reduction in Ghana’s COVID levy partly mitigates the royalty effect, although that benefit is reflected below the line in taxes rather than in reported operating costs.
Cash position, dividends and buyback plans
AngloGold ended the quarter with net cash of $991 million, representing a $1.3 billion improvement from June of the previous year. Liquidity totaled $4.2 billion. Calderon noted that the company had reported net debt of $311 million 12 months earlier.
The company declared $364 million in dividends for the second quarter, bringing first-half declared dividends to $949 million. AngloGold’s dividend policy provides for quarterly payments and an annual true-up intended to bring total dividends to 50% of free cash flow. Management used discretion to make a true-up payment at the half year.
Calderon said the company intends to return additional cash to shareholders if gold prices remain at current levels, potentially through share repurchases in addition to dividends. Shareholders have approved a $2 billion open-market share buyback program, though the company is awaiting approval from the South African Reserve Bank before proceeding.
In April, AngloGold repurchased $666 million of its 2028 and 2030 notes, reducing its longer-term financing obligations.
Cash tax payments reached a record $542 million in the second quarter. Doran and Calderon said the payments reflected improved profitability and timing across operating jurisdictions. Management expects cash taxes to decline to roughly $230 million to $250 million in each of the third and fourth quarters, which it said should support stronger cash conversion in the second half.
Organic growth focus
Management said it sees its most compelling near-term growth opportunities within its existing portfolio, particularly at Obuasi, Geita, Sukari, Siguiri and Cuiabá. Calderon said the company expects to provide a more detailed project update in the third quarter.
AngloGold has previously outlined potential production growth of 300,000 to 450,000 ounces from its existing operations over roughly three years. Calderon said the identified opportunities generally require relatively low capital intensity, involving additional mining, equipment, exploration, processing improvements and related infrastructure rather than large-scale expansions.
The company is also advancing the Arthur project in Nevada toward a full feasibility study. Calderon said Nevada is expected to become a significant production center for AngloGold in the early 2030s.
At Sukari, AngloGold said feasibility work on an 80-megawatt connection to Egypt’s national grid is nearly complete, with commissioning targeted for early 2028, subject to grid upgrades. The operation currently has a 30-megawatt solar facility.
Calderon said the company has no immediate urgency to sell its Tier 2 assets, citing their cash-flow generation at current gold prices. He said Serra Grande was sold because of its relatively small scale and management demands, while other assets remain valuable contributors to the portfolio.
About AngloGold Ashanti (NYSE:AU)
AngloGold Ashanti is a global gold mining company engaged in the exploration, development, production, processing and sale of gold. Headquartered in Johannesburg, South Africa, the company’s core activities span the full mining value chain from greenfield exploration and mine development through to ore processing and rehabilitation. Gold is the primary commodity produced, with individual operations sometimes yielding other by?products depending on local geology and processing methods.
The company was formed in 2004 through the merger of AngloGold and Ashanti Goldfields, creating a diversified international gold producer.
