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AngloGold Ashanti’s Take on Falling Gold Prices

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Falling AISC

AngloGold Ashanti is a South Africa-based gold mining company. It stands among the top gold producers around the world. It has about 20 gold mining operations in ten countries.

In 2014, the figures from the company’s annual reports state that it produced about 4.436 million ounces of gold. The figure rose by 8% on a YoY (year-over-year) basis. It also has AISC (all-in sustainable cash) costs of about $1,026 per ounce. This is down by ~12.50 from $1,174 in 2013.

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1Q15 performance

AngloGold Ashanti (AU) also posted its 1Q15 performance. It had a 7% YoY improvement in AISC costs due predominantly to a high result from its international mines. The production was 969,000 ounces at a total cash cost of $744 per ounce in the three months as of March 31, 2015. It fell from 1.055 million ounces at $770 per ounce in the first quarter of last year. For 1Q15, the AISC costs improved from $993 to $926 per ounce. Above is the downward scaling AISC cost chart for the company.

The company’s CEO, Srinivasan Venkatakrishnan, said that “This is an exceptionally strong performance from our International portfolio, in particular, and one which shows the benefit of our diversified portfolio. We’ve continued to focus on delivering real operational efficiencies and tight cost management, while ensuring we benefit from weaker producer currencies and lower oil prices. It shows in these results.”

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The company’s reports show that over the past two years, AngloGold Ashanti has cut the overhead expenditure by two-thirds. It also improved the quality of its portfolio through the introduction of two new and low-cost mines. It sold some assets, closed others, and removed loss-making ounces from ongoing operations.

Falling rand

In South Africa, the falling domestic currency is the rand. The falling currency resulted in a gain for the miners. The downfall is mainly due to costs being denominated in the local currency. Other South African miners that saw a benefit include Sibanye Gold (SBGL) and Gold Fields (GFI). These South African miners account for ~10.50% of the VanEck Vectors Gold Miners ETF (GDX). The falling precious metal commodities’ prices have also affected silver investors and silver ETFs. Silver ETFs like the iShares Silver Trust (SLV) and the Global X Silver Miners ETF (SIL) have lost ~7.30% and 31.75% on a YTD (year-to-date) basis.

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