JOHANNESBURG (Reuters) - Africa’s biggest gold miner AngloGold Ashanti (ANGJ.J) reported a 16 percent drop in first-quarter profit on Monday following a decline in South African production, sending its shares down nearly 5 percent.
AngloGold said adjusted earnings before interest, tax, depreciation and amortization (EBITDA) came in at $314 million (£242 million) in the first three months of 2017, down from $378 million in the same period a year earlier.
“South Africa had a difficult production quarter as an added focus on a safe start-up contributed to an unusually slow ramp-up after the year-end break,” AngloGold said in a statement.
Shares in AngloGold, which competes with Harmony (HARJ.J) and Gold Fields (GFIJ.J), dropped as much as 4.7 percent after the market opened. By 0705 GMT, the stock had pared losses to trade 2 percent lower at 147.54 rand.
AngloGold is in talks with unions about cutting some 800 jobs in South Africa, a country whose vast resources come with the risk of volatile labour relations, rising costs, regulatory disruptions and dizzying shaft depths.
“We are reviewing our South African operations to restore their margin and ensure they recover from a difficult start to the year,” AngloGold Chief Executive Srinivasan Venkatakrishnan said, without giving further details.
The ongoing review comes some two years after AngloGold, which operates in eight other countries including Brazil and Ghana, shelved plans to isolate its local mines by spinning off its international assets into a new London-listed entity that it had hoped would have attracted a higher investor rating.
Output from its domestic mines, which contribute roughly a quarter of the company’s annual gold production, has been declining in recent years due to regulatory disruptions related to safety.
Overall output fell 3.6 percent to 830,000 ounces in the quarter but the company stuck to its full-year production forecast of 3.6 million ounces to 3.75 million ounces.
AngloGold said its net debt edged down 3.6 percent during the quarter to $2.05 billion, putting the ratio of its net debt to EBITDA at 1.38 times, well below the 3.5 times level agreed with creditors.
The company plans to spend as much as $1 billion to revamp and extend the lives of its high-return mines, it said.
Reporting by Tiisetso Motsoeneng; editing by David Clarke