By Ed Stoddard
JOHANNESBURG (Reuters) - AngloGold Ashanti, Africa's top gold producer, said on Monday it would cut its exploration budget by more than half this year to focus on a few major projects and would restructure and lay off staff at its loss-making Obuasi mine in Ghana.
AngloGold's action follows a wave of cuts by mining companies around the world which have had to scale back exploration in the face of depressed prices and have been under pressure to rein in capital spending. The gold price, for example, has fallen by a third since it scaled record peaks above $1,920 an ounce in September of 2011. It is currently fetching around $1,300 an ounce.
"The problem child in our portfolio is the Obuasi mine. The cash bleed rate is simply not affordable," AngloGold's chief executive Srinivasan Venkatakrishnan, who is known as Venkat, told a media briefing after the company published first quarter results.
"It consumed $220 million in 2013. And it has consumed $40 million to date in 2014," he said.
Venkat said AngloGold was working with the government and the main mining union in Ghana to cut staff and bring in mechanised methods at the mine, which is over a century old and has long been a pillar of the industry in a country once called the "Gold Coast."
Venkat told Reuters in an interview the plan aims for underground production at the mine being to be temporarily shut this year, with only a surface operation left working.
What will eventually replace the current underground operation is a mechanised mine with a skilled work force, Venkat said. "We need to reduce the cash bleed rate. It is high at the current low prices," he said.
The company is still in talks with stakeholders and so has not come up with a final number on lay-offs yet or the costs associated with the process.
Venkat said that the mine employs around 6,500 people and workers in Ghana who are laid off can expect a severance package of three months for every year worked.
In line with wider industry trends, the CEO said AngloGold would cut its exploration budget to $150 to $175 million this year from $400 million in 2013 to focus on a few projects that could deliver "the most bang for the buck."
These include a drilling project in Colombia and exploration blocks in Guinea.
The group reported a rise in first-quarter earnings on Monday compared with the same period last year as it cut costs and lifted production.
AngloGold said adjusted headline earnings for the first quarter totalled $119 million, or 29 U.S. cents per share, compared with $113 million in the same period last year.
Total cash costs for the quarter fell 14 percent to $770 an ounce from the first quarter of 2013 as new, low-cost projects came on line in places such as Democratic Republic of Congo and as the company reduced procurement costs.
Output for the quarter fell to 1.06 million ounces from around 1.3 million ounces in the previous quarter. But year-on-year output rose 17 percent as operations outside of South Africa ramped up.
AngloGold's shares rose more than 3 percent.