AngloGold lowers costs (May 02, 2002)

Vancouver – Having been knocked out of the number one spot in terms of gold ounces produced, AngloGold (AU-N) has laid claim as the lowest cost miner among the World’s majors.

In the first three month of the year, the World’s second largest gold producer felt the impact of the sale of its high-cost mines in the Free State, as production dropped 340,000 oz., while cash costs improved to US$151 per oz. According to AngloGold, in US dollar terms, the move made the company the lowest cost gold major in the world.

However, most of the gains recorded over the quarter came from weak currencies in the bulk of its operating regions, most notably in South Africa and South America. In dollar terms, the South African region’s cash costs averaged US$136 per oz, while South America came in at US$125 per oz and the rest of its African operations averaged US$127 per oz.

The South African region made up the bulk of production hitting 837,000 oz during the quarter. The Great Noligwa mine in South Africa contributed 233,000 oz. during the quarter at cash cost of US$100 and total cost of US$109 per oz., while the Tau Tona mine added 159,000 oz. at cash costs of US$121 and total costs of US$129 per oz.

South American operations tallied 102,000 oz in the quarter, with about half of the total coming from the Morro Velho mine in Brazil.

The major’s Australian mines tallied 116,000 oz for the quarter at cash costs of US$196 per oz, while North American operations added 95,000 oz and bucked the cost cutting trend as cash costs came in at US$254 per oz, an 8% jump.

Overall, total costs to produce an oz of gold came in at US$188 per oz, compared to US$193 per oz tallied in the fourth quarter of 2001.

AngloGold posted a net profit of US$71 million, or 64 cents per share for the first quarter ended March 31, 2002.

“In comparison with the first quarter of 2001, earnings have increased by 60% in dollar terms and 134% in local currency (South African Rand),” said Bobby Godsell, AngloGold’s chief executive officer.

The company, which lost the status as the World’s number one producer last year to Newmont Mining, (NEM-N), recently sold several high cost mines in the Free State, which cut its gold production in the quarter to 1.4 million oz.and reduced its cost per oz of the yellow metal by US$8 to US$151.

Going forward, AngloGold aims to capitalize on a rising gold price by reducing its hedge book.

“In this quarter we have reduced the book by a further 1.7 million oz.” Says Godsell. “Whereas at December 31, 2001 we had 60% of our forecast 2002 gold production sold forward, today we have only 32% of the remainder of this year’s anticipated production sold forward.”