AngloGold upbeat on gold, compensation

Anglogold Ashanti, the world's third-largest gold producer, says it is not looking for acquisition targets right now, even as it expects the gold price to rise well above its current record.

The company, which runs some of the world's deepest mines, said it is also not considering making financial provisions for what could be a slew of compensation cases against the gold-mining industry after a key ruling from South Africa's top court, its chief executive said yesterday.

"Our new operating model has worked exceptionally well for us and so we will not split anything on the basis of improving operations," Mark Cutifani said in an interview in the Reuters Global Gold Forum, adding that the company was open to a range of options.

Cutifani also said the company was open to acquisition opportunities, but only if these made economic sense.

"The recent deals we have seen in the industry - at around $500 an ounce - may deliver value, but we do not need to take those sorts of bets given our track record for success across both exploration and carefully considered merger and acquisition projects," he said.

Cutifani, who said he expects the gold price to trade above $1500 an ounce, declined to comment on market talk that AngloGold might bid for London-listed African Barrick.

"The world has rediscovered the importance of gold and prices are now starting to trade closer to fundamentals," he said.

"Costs are above $1000 an ounce and structural inflation is above 10% per year due to increasing depths for mining, deteriorating grades and other physical factors. It is only a matter of time - and this won't be far away, before we breach $1500 an ounce," he added.

Cutifani also said he predicted deep-level mining would have a long future ahead of it, in spite of concern about the impact of a ruling by South Africa's top court that has opened doors for lung-diseased miners to sue their employers.

"We have come a long way in improving [deep-level mining] operations . we still have a long future ahead of us," Cutifani said.

The decision from the Constitutional Court stems from a 2006 claim brought against the company by a miner who worked underground for nearly 20 years, who alleged that AngloGold negligently exposed him to harmful gases and dust, as a result of which he contracted tuberculosis and chronic miner's lung.

With the potential bill for compensating sick or dead miners now set to rise dramatically, the cost of such operations could well outweigh the benefits, jeopardising the future of the deep-level mining sector.