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What Led AngloGold Ashanti to Report Weaker Production in 3Q16?

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Nov. 15 2016, Updated 6:04 p.m. ET

Fall in production

AngloGold Ashanti’s (AU) 3Q16 production rose 1.8% quarter-over-quarter to 900,000 ounces. AngloGold’s production for the first nine months of 2016 reached 73% of the midpoint of its new annual production guidance range.

Its production in 3Q16 was, however, 6% lower YoY (year-over-year). This fall was mainly due to the loss of production from its Obuasi and Cripple Creek & Victor mines, which were idled and sold, respectively.

In this article, we’ll analyze Anglo’s production growth by region. Production is an important variable for gold miners such as Eldorado Gold (EGO), New Gold (NGD), and IAMGOLD (IAG). Notably, EGO and NGD make up 3.5% of the VanEck Vectors Gold Miners ETF (GDX).

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South African region

AU’s South African region’s production fell 7% YoY to 235,000 ounces in 3Q16. This weaker production was due to lower average ore grades from its underground operations. Following three fatalities in July 2016, the company’s South African operations faced stoppages.

Note that Anglo’s South African operations are prone to regulatory stoppages and mass audits, which impact its production activities.

International operations

AU’s international operations produced 1.9 million ounces of gold in the first nine months of 2016, a 7.5% fall YoY. The company’s YoY fall resulted from the following:

  • stopping its tailings treatment at its Obuasi mine
  • planned reductions in ounce production at its Geita and Tropicana mines, mainly due to grade reductions
  • delays in accessing high-grade ore at its operation in Brazil

Given AU’s weaker-than-expected production year-to-date, it narrowed and reduced the midpoint of its production guidance for 2016 from 3.6 million–3.8 million ounces to 3.6 million–3.7 million ounces.

Next, we’ll discuss Anglo’s cost performance in 3Q16.

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