AngloGold Boosts Dividend On Record Cash Flow

Anglogold Ashanti more than doubled its full-year dividend on record cash flows and said that it was likely to boost quarterly dividends in the current financial year to about 100c/share per quarter.

“We will continue to grow the dividend where appropriate. About 100c/share per quarter seems the right type of number,” said Mark Cutifani, CEO of AngloGold, commenting on the group’s fourth-quarter and full-year results ended December.

Analysts were expecting a repeat of the 90c/share dividend of the third quarter and a full-year dividend of 270c/share, but AngloGold said it would pay 380c/share for the year on the back of record $1.3bn earnings and a 60 per cent increase in cash flow to $2.3bn – a performance that helped halve net debt to $610m.

“It’s been a good year,” said Cutifani, who added that the company expected 25 per cent growth in production and a similar leap in cash flow going forward.

“For every one per cent increase in the gold price, cash flow and earnings increase two per cent,” said Cutifani. Free cash flow increased 59 per cent on a 28 per cent increase in the gold price in the 2011 financial year compared to 2010. He expected the gold price would “poke through” $2,000/oz in the current calendar year, but would generally trade between $1,700 to $1,850/oz.

“With record earnings of $1.3bn and stronger cash flow than we’ve ever seen, we’ve laid an exceptionally strong foundation on which to grow the business,” said Cutifani in AngloGold's press statement. “Our focus is on pushing our projects through the pipeline and ensuring continued strong returns for shareholders,” he said.

As guided, full-year production came in at 4.33 million ounces with significant improvements in the Ghana mine, Obuasi.

FORECASTS
Production growth in 2012 was estimated to be between 4.3 million and 4.4 million ounces at a total cash cost of $780/oz to $805/oz. Capital expenditure for 2012 is forecast at $1.1bn on growth projects and $1.1bn to $1.2bn on projects to sustain the business.

This included rolling out an enterprise resource planning system across the group. Exploration and feasibility studies will cost about $380m, the company said.

The first quarter of 2012 had been affected by the normal slow start as operations restarted in South Africa. Production was expected to be around 1.03 million ounces at a total cash cost of $820/oz to $835/oz.

RESOURCE NATIONALISM
Cutifani said he did not expect major changes to the company's tax obligations in Ghana where the company operates the Obuasi and Geita gold mines, although proposals by the Ghanaian government to lift the corporate mining tax to 35 per cent could affect other operators in the country. Said Cutifani: “We are still waiting for the government to articulate its position, but the stability clause protects us in a number of ways”.

AngloGold pays 25 per cent in corporate tax and a three per cent royalty. The Ghanaian government is also considering introducing a windfall tax of 10 per cent in an effort to boost state revenues.

“Now that Obuasi was showing some cash this was not the time to be changing the rules,” said Cutifani. Obuasi started to record positive cash flow from 2010 totalling about $25m in the 2011 financial year.

Commenting on proposals in South Africa to introduce a resource rent tax, Cutifani said royalties could be “tickled up”, but the company had so far had no discussions with Government.

The African National Congress commissioned a report into nationalisation and state intervention in the South African mining sector.

The report set aside the prospect of nationalisation of mines, but said the tax regime could be revamped.

He expected the South African government would be more consultative than Australia's administration, where the imposition of a resource rent did not allow for the differences in margin between mining sectors.

“I am optimistic that in six to 12 months, we will have had constructive consultation with the South African government,” Cutifani said.

-Miningmx.com/GB