AngloGold Ashanti quarterly earnings

AngloGold Ashanti should change their name reported numbers for the quarter yesterday afternoon. The dudes on Hot Stoxx last night on CNBC Africa were talking about the trading update. The one enormous theme that I get from most of the South African portfolio managers is as follows: I don't like Gold mining companies, if I was pushed I would prefer to own the ETF. That is the overwhelming consensus that I get from the fellow talking heads. And in truth if most of them had stuck their money where their mouth was (and been long GLD) over the last five years they would have crushed the local gold producers.

But let us explore those AngloGold Ashanti numbers a little closer. 62 US cents per share of earnings for the quarter, that is around 410 ZA cents at the current exchange rate. Cash costs were higher than anticipated at 706 USD per fine ounce, production was inline with guidance at 1.039 million ounces for the quarter. In fact the production of this business is down nearly 2 million ounces from the highs of 6 million ounces a year. And that in part is where that line comes from about South African gold companies. Costs have increased as electricity is no longer cheap, production costs are higher, the ore bodies are not what they used to be and safety (happily) is a much bigger issue, and that comes with an associated cost too.

Back to Hot Stoxx last night, Peter Major from Cadiz had some useful insights about production hedges, but specifically about the best the company can do. He basically said that Mark Cutifani had been thrown what rugby calls a "hospital pass". The gold hedges have been unwound, some management mistakes from the past were now Cutifani's problems. And this is likely to take a while. Problems are solved a whole lot slower than they are made, that is the bottom line.

The stock was beaten down along with the rest of the sector last night in New York, the ADR sold off nearly 4.4 percent last evening. Related, but completely different (yes, you can say that) DRDGold's ADR was punished nearly 7 percent. AngloGold Ashanti closed three and a quarter percent lower here in Jozi. I feel neither good nor bad about the company, but can't find a really compelling reason to own them.