AngloGold Ashanti to cut 800 senior jobs
CEO Srinivasan Venkatakrishnan says the company is responding to second quarter losses and lower gold prices.
JOHANNESBURG - AngloGold Ashanti has promised to cut more costs after it swung to a second-quarter loss, dragged lower by a plunging gold price that has forced it to reduce staff and scrap its quarterly dividend.
Shares in the world's third-largest bullion producer by output were down almost 6 percent by midday on Wednesday after touching a more than 12-year low.
Gold prices have fallen by almost a quarter since January, the sharpest drop in a generation that has forced large miners from Barrick Gold to Newmont to write down the value of their assets.
AngloGold, whose operations stretch from South Africa and the Democratic Republic of Congo to Australia, had warned it would be forced to follow suit and on Wednesday took a $2.4 billion (R23.88bn) hit.
Africa's largest gold producer also followed peers across the mining industry with promises of more cost cuts, including plans to shed 40 percent of its 2,000 management jobs globally.
The company warned that cost-cutting measures will include an approximate 40 percent cut of the 2,000 management positions in the company.
CEO Srinivasan Venkatakrishnan says the company is attempting to increase revenue and lower costs.
Venkatakrishnan, a company veteran and former chief financial officer, was appointed to the top job in May after his boss Mark Cutifani left to run diversified miner Anglo American.
Speaking to The Money Show's Bruce Whitfield on Wednesday night, he said two projects are planned for the end of the year from which they expect to produce a total of 550-600,000 ounces annually at a cost "well below" $700 per ounce.
Venkatakrishnan says to make a change in the "cost culture" of the organisation, "you've got to lead from the top".
He noted an earlier reduction of the executive team from 13 to 10 members as an example.
"The corporate office and the group overheads have actually taken the lead and they've started practicing what they preach, and they are walking the talk."
He says the expected expenses in 2014 compared to 2012 will be less $460 million, "roughly equivalent to over $100 an ounce."
Asked how cutting 800 management jobs could be done without damaging the company, he said the company had to look at narrowing the number of duplicate jobs.
But he says the company is very cautious when removing jobs at any level.
"At the end of the day, we don't take job losses lightly - it is done with a lot of careful planning and thinking."
He said the company expects volatility in the gold market but in the long term, he said, they were "absolutely positive about the gold price".
"The best management approach one can take right now is to prepare for the gold price to be low … and if the gold price surprises you on the upside, you know what; at that stage, you cream the cash."
Speaking at a media conference earlier on Wednesday, Venkatakrishnan said, "We've taken the decision to prepare our business for a volatile gold price environment."
Like many South African miners, AngloGold has also been weighed down by rising costs and labour disputes at home.
The company said it would cut marginal projects in South Africa, which accounts for around 40 percent of its global output.
"We're phasing some of our expenditure on projects in South Africa and have reduced this year's total capital budget by about $150 million, to $1.95 billion," said Venkatakrishnan.
The group said it was "difficult" to contemplate wage increases, as the South African industry hammers out pay deals with unions.
Negotiations are progressing under the auspices of a mediator after unions last month declared an official wage dispute.