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Operational review (six months ended 31 december 2010)

 

Operational Review (six months ended 31 December 2010)

Group attributable gold production for the six months ended 31 December 2010 was similar to the six months ended December 2009, at 1.8 million ounces. This is in line with the operational guidance provided in August 2010.

At the Australasian operations, gold production increased by 12% from 289,000 ounces in the six months ended December 2009 to 323,000 ounces in the six months ended December 2010. St Ives increased production by 24% from 196,000 ounces to 243,000 ounces – mainly due to increased tonnes processed at a higher head grade. Production at Agnew decreased by 14% from 93,000 ounces to 80,000 ounces, mostly due to restricted underground stope access at Kim South.

At the South African operations, gold production decreased from 1,050,000 ounces to 982,000 ounces. At KDC, gold production declined from 695,000 ounces to 634,000 ounces due to a decrease in volumes mined as a result of safety stoppages and the replacement of a water pump column. At Beatrix, gold production dropped by 7% from 217,000 ounces to 202,000 ounces, while at South Deep gold output rose by 7% from 137,000 ounces to 146,000 ounces in line with the build-up plan.

In South America, managed gold equivalent production at Cerro Corona increased from 187,000 ounces in the six months ended 31 December 2009 to 200,000 ounces in the six months ended 31 December 2010, due to higher mined and processed volumes.

At the West African operations, total managed gold production increased from 445,000 ounces for the six months ended December 2009 to 479,000 ounces for the six months ended December 2010. At Damang, gold production increased by 21% from 97,000 ounces to 117,000 ounces, despite a 13 day plant shutdown in December 2009. The increase in production was mainly due to the commissioning of the secondary crusher during the prior period.

Tarkwa’s production increased from 348,000 ounces to 362,000 ounces largely due to an increase in Carbon-In- Leach (CIL) throughput.

Group revenue increased by 18% from R15.48 billion (US$2.0 billion) for the six months ended December 2009 to R18.3 billion (US$2.6 billion) for the six months ended December 2010. The 15% higher average gold price at R296,545 per kilogram (US$1,292 per ounce) compares with R252,464 per kilogram (US$1,026 per ounce) achieved for the six months ended 31 December 2009. Operating costs, including gold-in-process movements, increased by 10% from R9.2 billion (US$1.2 billion) to R10.2 billion (US$1.4 billion). This was mainly due to:

  • Annual wage increases at all of our operations
  • Higher electricity costs at our South African and Ghanaian operations due to tariff hikes
  • Normal inflationary increases

Total cash costs for the Group rose by 11% from R147,495 per kilogram (US$600 per ounce) to R163,416 per kilogram (US$712 per ounce). This was a result of the increase in operating costs mentioned above, as well as new royalty payments in South Africa.

At our Australian mines, operating costs, including gold-in-process movements, rose by 9% from A$212 million (US$184 million) to A$232 million (US$218 million) due to increased production, escalating deferred waste charges and increased grade control drilling at St Ives. At Agnew, the increase in costs was mainly due to costs incurred on the rehabilitation of poor ground conditions at Kim South.

At our South African operations, operating costs increased by 8% from R5.6 billion (US$728 million) for the six months ended 31 December 2009 to R6.0 billion (US$846 million) for the six months ended 31 December 2010.

This was due to annual wage hikes, a 27.5% surge in electricity costs and normal inflationary increases in stores and contractor payments, partially offset by cost saving initiatives implemented during the year.

In South America, operating costs at Cerro Corona increased from US$67 million to US$76 million, mainly due to higher production and increased statutory workers participation in profits because of improved earnings.

At our West African operations, operating costs, including gold-inprocess movements, increased from US$226 million to US$282 million, as a result of higher mining volumes and power costs.

Total Group operating profit increased from R6.3 billion (US$819 million) to R8.2 billion (US$1.1 billion).

In line with our policy to pay out 50% of earnings before taking account of investment opportunities and after excluding impairments, a final dividend of R0.70 per share has been paid for the six months ended 31 December 2010.