AngloGold, South Africa’s Lowest-Cost Miner: Can Others Catch Up?


Nov. 20 2020, Updated 5:21 p.m. ET

AngloGold: Lowest cost producer

AngloGold Ashanti (AU) is the lowest-cost South African gold miner. Its AISC (all-in sustaining costs) for 1Q16 came in at $860 per ounce, a 7% improvement year-over-year. Its Kibali and Tropicana mines provide low-cost ounces to the company. While South African costs are improving due to the weaker South African rand, international operations saw higher costs due to lower grades and mining deferrals. As most of the mining currencies for AU are weakening, any strength in the US dollar (UUP) (USDU) could lead to further tailwinds for AU’s costs.

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Sibanye Gold (SBGL) has higher costs than many of its peers (GDX). One major reason for this is its use of more labor-intensive technology, which the South African government promotes. Its AISC for 1Q16 was $895 per ton. The company maintained the guidance of $880 per ounce for 2016. As we’ve argued previously, its cost guidance might come under pressure due to its exchange rate assumptions versus spot rates, and an increase in wages.

Improving productivity?

Gold Fields’ (GFI) productivity rose after it spun off its South African operations, which were relatively more labor-intensive. Its AISC came in at $961 per ounce for 1Q16, which is high compared with its peers’ metrics.

Harmony Gold (HMY) has shifted to providing semi-annual results, so the information regarding its AISC for 1Q16 is not available. Its AISC for 4Q15 was $950 per ounce. Given that most of Harmony’s production comes from South Africa, where the rand weakness has led to a nice tailwind, the company’s margins have expanded considerably. For the quarter ended December 2015, Harmony’s production profit rose 84% quarter-over-quarter, driven by a 7% increase in gold prices and a 2% increase in gold production.


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