Mark Cutifani, the CEO of AngloGold Ashanti said something funny a while back

AngloGold Ashanti. Mark Cutifani, the CEO of AngloGold Ashanti said something funny a while back after having a particularly good reporting period, where he said something along the lines of call us "earnings 'r us". From then on I view him as a cuddly little teddy bear called Mark cute-and-funny. Anyway, that aside, the company reported for their third quarter this morning and early signs are that they are post some of the hedges unwind starting to look exciting. As they say in the statement ---> "Residual hedge book eliminated on 7 October at an average price of $1,300/oz, ending discounted gold sales." A good outcome at current gold price levels. For the record the company have eliminated nearly 12 million ounces of gold hedges since the beginning of 2008, that is nearly three years worth of full production.



Excellent, let us get down to the numbers that matter, production for the third quarter of 1.162 million ounces (expecting 1.14 million ounces next quarter) at a cash cost of 643 Dollars per ounce (expecting 3 dollars less cash costs next quarter). Plus they produced 389 thousand pounds of uranium. UxC says that the month end spot price of uranium, U3O8 was 58.5 Dollars per pound. Total production costs in Rand quarter on quarter ticked up just over two percent to 187,695 Rands per kg.




I guess it is safe to say that Mponeng (formally Western Deep) is their flagship mine. 138 thousand ounces a quarter, one percent better than last quarter, that annualises to 552 thousand ounces per annum, lower than the nearly 600 thousand ounces in 2006. Phew, this mine is deep nearly 3.4 km below the surface of the Gauteng Highveld. Amazingly I found something that suggested that the altitude of Carletonville is 1541 metres above sea level. So, subtract 3400 metres from that and you get to roughly two km's (1859 metres) below the surface of the ocean. BELOW!!! Holy smokes!!!!



America's, so think Brazil, Argentina, the USA and exploration assets in Colombia & Canada is their best region. It might only contribute 19 percent of production, but in operational free cash flow (FCF) it contributes 30 percent. Australia by the same measure stacks up at both 8 percent from a production and FCF point of view. New exploration in New Zealand, I wonder if it has anything to do with the filming of the Hobbit? South Africa accounts for 41 percent of total production, the presentation does not include what FCF percentage the region contributes. Strange that, or not.



I have emailed an old mate to ask him both this question, South African Free Cash Flows as a percentage of the overall business and what the numbers of shares in issue are now, versus back in 2008 pre closing out all of the hedges. Because that would give you a better indication of what to expect in earnings in the coming year. A quick back of the matchbox calculation suggests over three Dollars worth of earnings for the year, perhaps close to 330 US cents. For the next four quarters, provided all remains equal, which it will not of course. That equates to about 23 ZAR worth of earnings.



But methinks (me actually knows) that this is just a thumbsuck. And also, I can never understand why the platinum companies don't attract the same sort of sweeter valuations as the gold companies, they also have the reserves in the ground. As for Paul's idea that the US Fed or IMF should buy all the worthwhile gold assets in South Africa in a single knockout purchase. And then own the gold in the ground, what is the difference? It is in storage already in the rock. And give the workers a once off lifetime gratuity. A strange idea, but think about all the costs you will save guarding it.