London/Johannesburg – AngloGold Ashanti joined other goldminers in responding to the sharp fall in the price of the precious metal by writing down the value of assets by up to $2.6bn and curbing production plans.
The South African miner will take a writedown charge of $2.2bn-$2.6bn in its most recent quarter, which included the steepest one-day drop in the gold price in more than three decades.
Goldminers around the world have cut the value of their assets by billions of dollars in recent weeks. AngloGold, the third-largest producer by volume, joins rivals including Barrick and Newcrest in acknowledging the deterioration in prospects for the sector.
AngloGold would “tighten up on costs, overheads and capital”, said Srinivasan Venkatakrishnan, chief executive, after a $220 drop in the average quarterly gold price. Output this year would now be 4m-4.1m oz, AngloGold said, cutting previous guidance of 4.1m-4.4m oz.
The fall in the gold price has squeezed margins for miners, with South Africa’s Chamber of Mines on Monday warning that about 60 per cent of the nation’s gold mining operations are lossmaking at current prices as the sector enters critical wage talks.
The chamber is negotiating on behalf of major gold producers – including AngloGold Ashanti, Harmony Gold and Sibanye Gold – whose initial offer to unions on Monday included a 4 per cent increase in basic pay across the board.
That figure contrasted sharply with the high demands put forward by the two key unions. The National Union of Mineworkers (NUM), the dominant union in gold, has called for salary increases of 60 per cent for some categories of miners. The Association of Mineworkers and Construction Union (Amcu), which is involved in the talks for the first time, is demanding that companies more than double the salaries of underground workers.
The yawning gap between the companies’ offer and the unions’ demands illustrates how difficult the wage negotiations are likely to be, even though these are initial positions in a bargaining process.
Asked what the consequences would be if companies were obliged to accept above-inflation salary increases, Elize Strydom, a senior executive at the chamber, said: “It would be dire.”
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