Mining round-up: AngloGold swings to profit, Centamin hit by gold price drop

iNVEZZ.com, Wednesday, November 6th: The AngloGold Ashanti (JSE:ANG, NYSE:AU) share price jumped today as the world’s third biggest gold-miner reported a higher-than-expected profit in the third quarter, whereas fellow miner Centamin (LON:CEY) was punished for a significant drop in earnings.

**AngloGold Ashanti back into the black**
The bullion producer said that its adjusted headline earnings, which exclude certain one-time items, reached $576 million, or $1.48 per share, in the three months to 30 September, reversing a loss of $135 million, or $0.35 per share, in the prior quarter. The result was well above the consensus of $0.082 cents in a Reuters poll.

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Africa’s biggest gold-miner put the improved performance down to a 12% growth in production, to 1.043 million ounces, and a 10% drop in total cash costs to $809 per ounce, with efficiency improvement initiatives having begun to bear fruit. Output and costs came in better than the company’s own forecasts for 950 thousand to one million ounces at $860-$890 per ounce, but it’s maintaining the full-year output outlook at 4 to 4.1 million ounces, with Q4 production at 1.13-1.17 million ounces at a cost of $800 per ounce.

In a statement reporting the results, the company said: “AngloGold Ashanti responded swiftly to a sharp drop in the gold price this year, cutting unprofitable ounces from its production base, optimising its capital expenditure and enhancing efficiency by slashing waste and improving its mine plans Two new mines produced their first gold during the quarter – Tropicana in Australia and Kibali in the Democratic Republic of Congo. The two mines are expected to contribute 550-600,000 ounces next year at total cash costs below the current average, improving the company’s overall cost profile.

AngloGold Ashanti has pledged to continue removing unprofitable ounces from its production base in order to further improve free cash-flow generation. Its CEO Srinivasan Venkatakrishnan told journalists after the earnings release that the company is on track to close the sale of its Navachab operation in Namibia and will cut 430 jobs at its flagship Obuasi mine in Ghana in a bid to cut costs.

Shares in AngloGold rose by nearly seven percent in early trading in Johannesburg today. The NYSE-listed ADRs rose by about six percent in pre-market trade.
**As of 13.03 UTC buy AngloGold Ashanti shares at 15,844 South African cents.**
**As of 13.03 UTC sell AngloGold Ashanti shares at 15,820 South African cents.**
**Centamin earnings hit by lower gold price**
Egypt-focused gold miner Centamin reported today that its third quarter EBITDA fell by 36 percent year-on-year to $43.1 million, as higher output was offset by a 21 percent drop in average realised gold prices. The company’s gold production increased by 39 percent y/y to 84,757 ounces in Q3, but was by nine percent lower compared to the prior quarter.
However, Centamin said that it remains on track to meet, or even exceed, its full-year forecast for 320,000 ounces, a 20 percent increase year-on-year, at a cash operating cost of $700 per ounce. That item was down to $693 per ounce in Q3 from $724 a year earlier.
Centamin’s share price fell by nearly four percent in early London trading and following the earnings release.
**As of 13.03 UTC buy Centamin shares at 48.95 pence.**
**As of 12.03 UTC sell Centamin shares at 48.81 pence.**
**M&A activity shrinks**
!m[EY study: M&A activity contracts as industry remains cautious](/uploads/story/6602/thumbs/pic11_inline.jpg)
According to a just-released Ernst & Young study, merger and acquisition activity in the mining sector has declined significantly this year, with most industry incumbents remaining cautious and introspective and many announced non-core divestments yet to close.
A total of 537 deals worth $96.9 billion were completed in the nine months through September, with 165 deals worth $8 billion made in the third quarter. This compares with 706 deals worth $75.9 billion in the first nine months of 2012 but excluding the mega merger of GlencoreXstrata (LON:GLEN), deal value in the first nine months of this year was 22 percent lower y/y.
EY noted that the decline in M&A volume and value could be explained by a “widespread deal inertia and a seemingly unbridgeable gap between buyer and seller price expectations”. The accountancy firm added that equity markets remain challenging, with junior follow-on proceeds and IPO volumes remaining at historic lows, a fact that boosts opportunities for alternative finance and private capital providers.
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