Gold Q3 Earnings Update: AngloGold Ashanti’s Halves Dividend, Kinross Surpasses Expectations

on Nov 8, 2012
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The world’s third-largest gold producer, AngloGold Ashanti (NYSE:AU), released its results for the third quarter of 2012 and announced that it would cut its dividend in half due to a fall in production from wildcat strikes at its South African mines. Meanwhile, the Canadian miner Kinross (TSE:K, NYSE:KGC) reported that it remained on track to meet its yearly production forecast, with earnings beating analysts’ estimations.

**AngloGold Ashanti’s Earnings Fall**
On 8 November 2012, the Johannesburg-based AngloGold Ashanti said in a statement that adjusted headline earnings in the three months ended September 30 were $235 million (£147 million), or 61 cents per share, down from $457 million, or 118 cents per share in 2011. “It’s been a pretty tough quarter and we’re looking at an even tougher quarter-four given that this is where most of the issues were relating to the strike and labour unrest,” AngloGold’s CEO Mark Cutifani noted in a conference call, as quoted by Bloomberg.

AngloGold predictably attributes its disappointing quarterly results mostly to the labour unrest in South Africa, which halted the company’s six South African mines for more than a month. In addition, AngloGold Ashanti also reported lower-than-expected output from its Obuasi mine in Ghana.
“We’re in the middle of a review of our South African operations,” Mr Cutifani told reporters as quoted by Bloomberg. “There is no doubt that we’re going to have to do some restructuring work.”

**Dividend Slashed in Half**
!m[South African Strikes Weigh On Third Largest Bullion Producer’s Quarterly Results ](/uploads/story/753/thumbs/pic1_inline.png)The “restructuring work”, will mainly occur in the company finances,with it announced that it was conducting a study on corporate costs and that it reduced its capex budged for 2012 by $200 million to between $2 billion and $2.1 billion. AngloGold also cut its dividend by half in the third quarter, to 50 South African cents per share, compared with 100 cents in the previous quarter. “It’s been a tough period for the industry here, but we’ve taken decisive action on a number of fronts to stay the course,” said Mr Cutifani in the company press release. “Our major projects are on track and we’re making the decisions to ensure we maintain a lean, fit business that will continue delivering strong returns.”

**Toronto-Based Kinross Exceeds Expectations**
And while AngloGold Ashanti struggles to get back on track, the Canadian gold producer Kinross reported better-than-expected results. Earnings were $224.9 million, or 20 cents per share for the quarter ended September 30, up from $207.1 million, or 18 cents per share, in the same period in 2011. Reuters notes that analysts had expected earnings of 19 cents a share. Kinross, however, reported a seven percent drop in adjusted profit, with higher costs outweighing stronger production.

In its quarterly statement, Kinross said that it remained on track to meet its yearly production forecast of approximately 2.5-2.6 million gold equivalent ounces. “We recorded solid results in the third quarter and remain on track to deliver on our full-year guidance for production and costs,” said the company CEO J. Paul Rollinson.
Reuters reports that Mr Rollinson took the job as Kinross CEO in August, replacing former CEO Tye Burt, leading Kinross’ $7.1 billion takeover of Red Back Mining in 2010, with the deal so far failing to live up to expectations.

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