Anglogold Ashanti PLC (AU) 2022 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the AngloGold Ashanti 2022 First Quarter Market Update. (Operator Instructions) Please also note that this event is being recorded.

I would now like to turn the conference over to Stewart Bailey. Please go ahead.

Market Update Call. We have on the line Alberto and Christine and the rest of the executive team. You will note the safe harbor statement at the beginning of the presentation. That contains important information regarding forward-looking statements that may be made in this presentation. I do urge you to look at it, it is important.

Without further ado, I'll hand over to Alberto to make some opening remarks. Alberto?

Thank you, Stewart. And well, good almost afternoon to all, morning to some. We'll start with safety. So that is Slide 4, prioritizing health and safety of our people and communities. You can see the trend. We continue that downward trend, which is encouraging. Total recordable injury rates, 1.19 per million hours worked. That's good in the context of, let's say, even of our top peers in the ICMM and way below the average.

We, however, continue to be focused on major hazards. Those are the few sort of risks that can really harm or kill people, and we are focusing on those few and making sure that everybody in operations understands those risks and the few things that you can do to control them.

Our emphasis on COVID-19 remains on vaccination, 82% of the workforce is fully vaccinated. But as we will learn later, again that's still an issue in some parts of the world, right now in Western Australia.

Let's move on to the next slide. So these are some highlights. We already touched about safety. So let me probably go into production. I think we're pleased with how production has developed even if you see a flat production year-on-year. It masks a lot of obviously different scenarios. We had very solid production performances in Sunrise, in Tropicana, we'll see in Cerro Vanguardia, in Siguiri and then others are just what was expected. Obuasi is doing well, but obviously less than the previous year.

Geita is in a transition. We'll talk about that. Kibali is also -- it should catch up, it's lower. But all in all, like as I said, it's a quite -- yes, the trend continues the trend that we saw in the second half of last year of more predictable and growth in many of the operations.

I think one probably a point that I would underscore is on grade. If you look at the appendix, you'll see that the average grade of the first quarter is similar to the first quarter of '21, and we haven't seen that in many, many years. We have actually been going down on grade since 2018. So this is just a result of the additional investment in staying business capital and beginning to see more flexibilities on the mine and on gaining the mine's resources that are necessary to have more predictable operations, obviously, also the right people in the right place and the operating model. All of that contributes to more predictability. And in this case now, we -- I see it a bit as a turning point.

When you then look at costs, we are tracking below the industry inflation trend and below the industry, our cash costs went up 4%. Inflation went up 8%. We did and we will see it later in Christine's slides that inflation was about $80 an ounce. So that's all on oil and reagents and a lot of the commodities, but we were able to counter that and limit as much as we could the increase to 4%.

I probably also encourage you if you open up by assets, you will see very different pictures. And you will see good progress in Africa, good progress in Australia. Including in cost, we were expecting a significant increase in cost in Geita, but that was just from the transition from underground to open pit, but that should improve significantly later on in the year. And again, I'll touch on that when we talk about Africa.

So all in all, I think it was -- we were able to sustain the cost pressures, which was good. The -- we are investing much more in sustaining CapEx, so that obviously drives the absolute rise in all-in sustaining costs. We were pleased with the cash conversion. We were pleased with the more than $500 million that we have been paid by our Kibali DRC. And that obviously was a big contributor to a very healthy free cash flow of $268 million, even after funding the Corvus acquisition and paying the final 2021 dividend.

So we have a very strong balance sheet, low gearing, strong liquidity and a balance sheet that can weather any changes in gold prices. We're seeing a market that is volatility is extreme as today that we're just leaving today, and gold price is also falling in this whole lots of volatility. So we will be ready to fund what we need to fund, which is for the next year is sustaining sort of around $800 million in sustaining CapEx. We -- all of this in sustaining CapEx is also framed within our full asset potential that we've spoken before. And this is just a systematic process of going asset-by-asset, 3 months, with teams that are joint teams by the assets, consultants and then people from our technical experts from the Chief Technology Officer and the Chief Development Officer and looking at the few things that can make a significant difference on the assets.

We have completed the reviews and -- not totally, but mainly in Sunrise, the diagnostic and we're working on the design of the implementation program in Siguiri. We're also quite advanced and what we've seen confirms the potential of doing step change in each of our -- on our operations.

Finally, in this process, probably mentioning of regaining competitiveness, we have our new operation in Nevada. That's progressing well. I would highlight quickly, we are -- we completed -- I'm sorry, we will -- we're working on the feasibility of North Bullfrog, and we should complete that by the end of this year or beginning of '23. We've commenced the pre-feasibility study at Silicon, and we're continuing the drilling in other areas, Merlin and other areas.

In terms of Silicon, we talked about the pre-feasibility study. We actually applied and received a permit -- an Eagle permit was received by the second project in the quarter, and we now are moving for the licensing in North Bullfrog and we expect to hopefully have that in between 12 to 18 months, 6 months for the, what is called the data add, adequacy review and about 12 months for the environmental impact study. So that is progressing quite well.

Let me go into each of the -- still not the assets, just the key metrics, let's go one by one. I already talked about production and what's going on. We also spoke about total cash cost, corporate and marketing costs, slightly up, but more probably travel more than anything else. We're starting a bit of travel, not as before, but a bit of travel.

Exploration, we are investing quite a bit. You look at what we're investing in exploration in brownfields. In Sunrise, it's about $35 billion in this year expected. In Tropicana, it's quite significant, too, but we're happy with the results. We talked about capital expenditure that will be within guidance on midpoints, about $800 million in sustaining CapEx and about something between $250 million or something like that or $300 million on growth. Probably that's where -- yes, we talked about the cash flow already and that how it was so significantly up.

So if we go now to production, Africa, we see a very good quarter in Africa, both in production and in cost overall. Again, there's the exception of -- it's not an exception in Geita. We knew that we're in this transition, but also we expect a significantly better performance as we finish this transition into the open pit of Nyamulilima.

But if you look asset by asset, Iduapriem production was higher as the mine treated the higher grade ore tonnes from Block 5 and Cut 2. Higher production costs improved by around 10%. Critical Obuasi, the ramp-up continues, as we've said. We are on track to achieve the 4,000 tonnes per day by the end of the first half of 2022. We would have seen about 3,000 tonnes per day even in the last month, and production for the period was close to 40,000 ounces. So we are making good progress.

Phase 3 of the project aims to increase production to 5,000 tonnes per day. That continues in progress. There's a lot of activity. There's many things on the critical path. But so far, we're quite pleased with how Obuasi is progressing. Siguiri, also continues to show meaningful improvement through a combination of better grades and higher throughput. Costs were marginally better, but we were impacted quite a bit by inflation cost and cost base across mining and processing, but the full asset potential should allow us to regain cost competitiveness in Siguiri and put the cash cost back, let's say, under $1,000 into the $900s.

Geita, we spoke about that. That's, again, a Tier 1 mine, it's in this transition. But as I said, we should end up the year versus the first quarter for significantly better grade, significantly better production and significantly lower costs. And then Kibali, production was lower, but lower throughput as a proportion of mine was used to replenish stockpiles, but we should be within guidance, and it should continue to do well. So a very good all in all performance by the Africa team.

If we go to Latin America, unfortunately, it was a very challenging quarter for Brazil. Production was adversely impacted by intense rainfalls in Minas Gerais. And yes, we lost a lot of production, 10 days of lost production in Cuiabá and a month of lost production in CdS. And so that's just put completely our cash cost in untenable and sustainable sort of levels.

Having said that, if you -- we're going to start separating in time between Cuiabá and CdS. Those are very different assets. But if you look at South America, Cerro Vanguardia performed well, if we look at their cash cost, look at their production. Cuiabá also performed well, and we expect it to have a good performance this year. The cash costs were slightly higher, but not much. And then you have significantly impact of CdS.

And then you have Serra Grande with an enormous impact in cash cost about $400 an ounce because of the -- again, the rains and the delays. Having said that, we do expect Serra Grande to be able to go back to the cash cost of last year -- of last quarter by the end of this year or beginning of next year.

So what else, we've spent about $30 million on TSF conversions in the first quarter and expect to close -- to spend close to $70 million for the remainder of the year. So that is still putting an enormous amount of pressure in our cost. The TSF investment is expected to remain material in each of 2022 to 2025, but it will decrease over time. I think that would be it on Latin America.

If we go to Australia, we would stop by saying that the labor situation remains challenging. Despite the recent opening of the borders, we still are experiencing severe skilled shortages. And that is more than having an impact on the production with sort of -- will cause us problems in the longer term that we do need to remedy. And so we're still worried about the very low unemployment levels across the country and the lack of getting skilled labor.

So -- however, there is a positive note. We're starting to see improvement in labor availability in April as COVID-19-related absenteeism begins to ease. But despite of these challenges, again, what the mine leadership did was, obviously, focused the scarce resources that we had on production. And so you see Sunrise Dam produced 61,000 ounces compared to 46,000 during the same period last year. So a very noticeable improvement. That was a combination of improved mill feed grades and metallurgical recoveries. And as we reported back in February, the grade reconciliation has gone back in line with expectations.

In terms of cost competitiveness, the costs are still high. They will always be high. I think that's one of the few good operations that will still -- we will still see in 2 or 3 years, let's say, cash cost in the $1,100 levels or something along that. But it's in a very good jurisdiction. It complements very well with Tropicana. And we will embed -- we've concluded the initial steps of the full asset potential, and our priority will be focused in improving the quality of our delivery to the mill. Basically, this is an issue of developing the success that the exploration team has had in the different ore bodies, frankly, and others that it has uncovered and making sure that we have the feed that will allow us to fill the plants and lower the costs.

Tropicana's production was 66,000 ounces compared to 58,000 during the same period last year. So again, we're quite pleased with that. We're quite pleased with the investment in the Havana waste stripping that continues to progress. We -- that was one area where we had to some months ago pull back because of the issues of labor. But hopefully, we will be able to -- we have right now to renew this, which will be key for the forecast that we have for improving production in next year and beyond.

I think that -- so it's -- yes, you can see both Australia, a good quarter, better production, better cash cost and especially, the trend is quite good.

So let me now hand over to Christine to cover the financials.

We had a solid cost performance in the first quarter, and that was underpinned by operational improvements during our inward investment program at Obuasi, Geita, Iduapriem and Tropicana and also in tailings compliance in Brazil. Our cash costs came in at $1,041 an ounce, with a year-over-year increase contained to 4% or $42 an ounce, and that was despite inflationary pressure and other uncontrollable factors. Our overall focus remains on improving our operational performance, tightening cost discipline and delivering on our full asset potential program.

Inflationary pressures contributed about $82 an ounce or 8% to cash costs. There were also higher royalty costs of $3 an ounce, which was linked to the higher gold price. So this upward pressure on costs was partially offset by favorable foreign exchange movements of $10 an ounce. So our controllable factors had a $33 an ounce favorable impact on costs and that's notably with the stockpile and golden proceeds movements that were such a big feature in the first quarter of last year and that did not repeat this year.

And certainly, we also saw favorable VAT product credits of $20 an ounce, which were also partly offset by lower grades and efficiency. So as Alberto mentioned, the flooding in Brazil impacted group cash cost by about $21 an ounce in the first quarter. And we saw a production impact of about 10,000 ounces in Brazil. And we estimate a $36 million in total infrastructure damage. And of that $36 million, $2 million was spent in the first quarter and $23 million will be spent in the remainder of 2022. So what this did was increase the all-in sustaining costs at AGA Mineração by about $280 an ounce in Q1 and estimated at about $180 -- I'm sorry, $118 an ounce for the full year.

So the inflation pressures we warned about last year has become more acute, particularly towards the back end of the first quarter as the Russia-Ukraine conflict impacted global supply chain and the cost of inputs like oil and gas, explosives, lubricants and cyanide. So overall, we experienced mining inflation of about 7% to 8% for Q1, and we expect inflation of around 9% for the full year. So labor and mining contractors are our largest cost components at approximately 65%. And so here, we saw an average inflation of 6% and 10%, respectively, in the first quarter.

From an oil price perspective, we saw inflation of around 20% and oil in itself comprises about 12% of our input costs. Our current outlook for the rest of the year is about -- is around $100 per barrel versus our guidance assumption of $80 per barrel. So we do continue to manage our supply risk through increased inventory levels, which have certainly helped delay inflationary impacts. We're also collaborating with strategic suppliers to explore forward buying, especially explosives and cyanide and in our built-in and full mechanisms in our main contracts.

So moving on. Open pit grades were about 15% lower quarter-on-quarter, and that was primarily due to Geita. We lowered grade ore from Nyamulilima, replaced a higher-grade Nyankanga Cut 8 stockpile that was processed in the first quarter of last year. We saw recovered grades from the underground, were about 8% higher year-on-year, with improved mill feed grades and metallurgical recoveries at Sunrise, Geita as well as improvements at Kibali and CVSA and those more than offset lower grades in Brazil.

We spoke earlier to the impact of flood, both on grades and volumes and also Obuasi saw 30% lower yields due to the treatment of Córrego do Sítio on tailings materials.

Moving on. All-in sustaining costs were about 9%, up to about $1,405 an ounce, driven by the higher cash costs and our planned increase in sustaining capital. So in this figure is about $5 an ounce incremental COVID-19 impact and $52 an ounce for the Brazil tailings compliance. So our sustaining capital, which includes the equity accounted JVs, that increased by about $26 million or about 18% compared to last year. And that was mainly due to the tailing spend, stripping at CVSA and the development at Obuasi. So our input reinvestment to extend mine life and to improve operating flexibility remains a key priority for us.

Moving on to the balance sheet. Our balance sheet remains in a solid position with long-dated debt maturities, low leverage and $2.5 billion in liquidity. Adjusted net debt of $917 million at the end of the quarter, is 1% up year-on-year and includes the $365 million January payment for the Corvus acquisition. The adjusted net debt to adjusted EBITDA ratio was 0.51x at the end of Q1 and that was after accounting for the quarter's payments, the final 2021 dividend of $60 million and our innovated CapEx.

So after the cornerstone of our strategy is disciplined capital allocation and self-funded improvements in the balance sheet over the long term. Our leverage target remains one times -- it remains below the 1x adjusted net debt to adjusted EBITDA target through the cycle. Strong liquidity equals good flexibility. So we have around $1 billion in cash, even before factoring in our remaining $230 million in the DRC that was at the end of Q1 and an undrawn $1.4 billion revolving credit facility.

From a credit rating perspective, Moody's last month affirmed our BAA3 investment-grade rating and lifted the outlook to stable from negative, and that was in line with the South African sovereign rating. In February, Fitch also affirmed our BBB- investment-grade credit with a stable outlook. And last month, S&P affirmed our BB+ sub-investment grade credit rating and changed the outlook to stable.

Moving on to cash lockups. As Alberto mentioned, our cash conversion received a boost from the $326 million received from Kibali in the first quarter, and that was in the form of the shareholder loan repayment. So our remaining share of the outstanding cash balance at the end of March was $232 million, and that has come down further with the $210 million we received last week. The outstanding balances owed to the group in form of cash, VAT receivables and export duties came down by 20% during the first quarter to $637 million. And if the additional $210 million cash distribution from Kibali after the quarter end is included, this reduction is 51%.

Cash lockups at Geita and Kibali and export duty receivables at CVSA remained a challenge. In Tanzania, the net VAT receivable increased by $13 million to $155 million. The current VAT receivable of $37 million should be seen as a timing issue as the tax authorities experienced some technical systems issues in the first quarter. We have verified that refunds of $22.5 million, which are available to offset against corporate taxes going forward. So we continue to engage with the Tanzanian authorities regarding the mechanism to recover the historical VAT accumulated between July 2017 and end June 2020, and that amount is $118 million, which is net of discounting provisions.

In the DRC, our share of recoverable VAT and fuel duties increased by $6 million to $79 million at the end of the quarter. And in Argentina, the export duty receivable remained largely unchanged during the first quarter and that's approximately $20 million. And Cerro Vanguardia had a cash balance equivalent to $151 million at the end of March, of which $105 million has been declared as offshore dividends. Application has been made to transfer these funds to the Central Bank. So the total cash balance continues to be invested at very attractive rates of return locally and does remain fully available for Cerro Vanguardia’s operational requirements.

So from a guidance perspective, we are on track to achieve our full year guidance for 2022 as the stabilized operating trend continued and sequential quarterly improvements in production and costs are expected for the remainder of the year. So in line with past streams, production this year is expected to be second half weighted with Obuasi expected to ramp up by midyear. We're also expecting marginal improvements at Iduapriem, Siguiri and Geita and steady performance are expected at the remainder of the assets.

Our production is tracking expectations, except for Brazil, where we saw the heavy rainfall disruptions. From an inflation perspective, we are managing this proactively whilst we do focus on embedding the new operating model, which will improve operating efficiencies and we are implementing the operations excellence initiatives alongside the full asset potential review.

As we previously communicated, all-in sustaining costs are expected to be between $1,295 an ounce and $1,425 an ounce. That is consistent with last year's level. We innovate the sustaining CapEx underpins our reinvestment strategy.

Our unit costs are expected to decline into the second half of the year as production ticks up. So based on the planned production profile, we expect that unit cash costs and all-in sustaining costs will track around the top level of the annual cost guidance ranges for the first half of the year, and that is before trending lower and within the guidance ranges in the second half of the year. The average gold spot price received is currently forecast to be more than $1,800 per ounce with our original guidance based on an assumption of $1,650 per ounce.

So the higher revenue directly impacts revenue royalties, and that is expected to increase cash costs by about $11 an ounce and that we're comfortable that this does remain within the overall guidance range.

Cost pressures as a result of rising inflation and higher-than-expected oil prices are expected to continue through the remainder of the year.

From a capital expenditure perspective, we've guided $1.05 billion to $1.15 billion, and that comprises sustaining capital of $770 million to $840 million, which includes $100 million of tailings capital for Brazil. Our growth capital is guided at $280 million to $310 million and includes remaining funding for Obuasi Phase 3, about $100 million for Havana stripping at Tropicana and $60 million for a new TSF at Iduapriem. The remainder of the capital is spread between Geita, Siguiri and the Colombia feasibility study.

We do remain mindful that the further waves of COVID-19 and its impacts on communities and economies of the actions that authorities may take in response are largely unpredictable. Our guidance, therefore, continues to exclude any incremental impacts on production and costs relating to the COVID-19 pandemic, which thankfully have been muted so far this year. Argentina was impacted earlier in the year and is almost back to normalized underground capacity. Western Australia remains high risk and will continue to be monitored.

Finally, to conclude, this marks my last results presentation for AngloGold Ashanti. I will certainly miss my colleagues here, and I would like to register my sincere appreciation and convey my thanks to all of you as well as to the entire team for the unwavering support during my tenure. I'm pleased to leave the company with one of the strongest balance sheets in recent memory and plenty of liquidity, and that should provide Alberto with the much needed firepower as he pursues the next phase of the company's disciplined growth strategy, and I wish him all the very best in this regard.

With that, I'll now hand over to Alberto to conclude.

Many thanks, Christine. As said, we've -- I think it's a good solid first quarter, but we are very aware that we just need to keep delivering on operational excellence and discipline and keep delivering every 3 months, every 6 months. We start, obviously, by keeping our people safe and well, supporting the communities is the priority. You've seen in this presentation that we are on the right track. We remain committed to transparent reporting not only on emissions, but also on all the risks presented, changing in climate and all the steps that we're making.

To mitigate those, you will hear from us in some months what are our interim targets for CO2 reduction by 2030. So we're almost finished with that work, and we should be able to present it publicly how we -- that interim step between now and 2050 or before where we plan to be at net zero.

We've started to see as one of the big focus has been the operating model and basically doing the basics right. We've seen that now in operations, in operating improvements, people. There's much more clarity around accountabilities. I think especially the operations are very clear what they need to do.

And as a consequence, we're seeing a much more predictable company and probably doing what we say we're going to do.

We are probably one critical area of focus because it has such a massive impact in the company, and it was so traumatic, last year was Obuasi. And we're pleased with the development of Obuasi. There's certainly a lot of work still to do, but we are way on our way to deliver the -- what we've committed of 4,000 tonnes per day by June. We're already at between 3,000 and 4,000 already. So we should be able to -- barring any issues, we should be able to deliver that and then consequently, the target of around 250,000 ounces for the year. But at the same time, we are focusing on the development project, the KSM and everything needed to then ramp up to 5,000 tonnes per day by the end of 2023, and hence, take this mine to its potential, which is around 400,000 to 450,000 ounces by '24, '25.

If we go to the last and I'll conclude here, AngloGold, we -- as probably I started saying, we have a high-quality asset portfolio. We have a self-generated project pipeline. We have excellent people and a very strong balance sheet. Those are the critical foundations to make long-term success of any mining company. But we're far from our potential. We're making progress, but we need to continue to work very hard on all the areas that we've spoken before. We are starting to achieve our main catalysts. We have, as I said, a much more focused operating culture. We are having a more predictable operations, predictable in cost, predictable in grade. All of the investment we've done in sustaining CapEx is beginning to bear fruits. As I mentioned before, this quarter is probably the first one since 2018 where we have a stable grade. And I think that's going to be an important turning point for the company.

In terms of the leadership team, it's a combination of experienced leaders and new leaders in the -- coming with a lot of experience in gold mining, both our new CTO and our CDO, and also long experience in resources and mining, in the HR space. So that combination between very senior experienced people existing and new blood, I think, is responsible for this new focus and this new results in terms of delivering predictable outcomes.

So I'm happy with how things are progressing. I think, as I said before, that we are on our way, and we have a clear plan. The full asset potential that I spoke before will be a centerpiece of getting -- of recovering cost competitive that we lost some years ago, and we are -- we understand what we need to do to take Anglo Ashanti back and its valuation back among -- its place among the top gold mining companies in the world.

With that, I thank you for listening, and I open to questions.

(Operator Instructions) Our first question is from Dominic O'Kane of JPMorgan.

I've got a question on capital distributions and shareholder distributions. So very positively during the quarter. You've indicated that you received over $500 million back from the DRC. And the net debt-EBITDA of the company, as you said, looking very healthy at 0.5x. And you talk about the long-term target of minimizing net debt-EBITDA at around about 1.0x.

What do shareholders need to see for excess capital to come back? What milestones do you think in terms of your outlook for the company this year and into next year do you think need to be achieved before we can start to think about maybe some excess capital returns beyond the 20% under the ordinary dividend policy?

Thanks, Dominic, for the question. Look, this new policy was approved just, I don't think, even a year ago. And one of the things that I've said, well, for the time being, I think it's something that we can continue. If we knew that the gold price was going to stay where it is, I'd probably think differently. But obviously, none of us know. And what is clear to me is that a lot of the troubles that we got into is from underinvestment in sustaining capital.

And I think that the best money, the best way to add shareholder value is these like 2 or 3 years of significant investment around the $300 an ounce that will give a lot of the mines the flexibility needs and put it and have the number of years of reserves and number of year of resources necessary for a company like the type of company that we want to have in AngloGold.

So I think that, that will again by having more money on exploration, more money on -- that will allow us to have better 2-year and then 5-year plans and everything related to a more predictable company. Once we have that funding, and we will go down to around $220 an ounce in a short space of time, let's -- I'll say, in 2024, let's say, 2025. And if we have obviously accumulated more capital, we will obviously reconsider things. But for now, we just want to make sure that whatever happens to the gold price, let's say, other 95% probably -- probability, we can fund the necessary investments that we need.

Internal, okay. I mean if we have a scenario where the gold price is flat or slightly higher or higher for the rest of the year, is there a net debt-EBITDA where you'd feel comfortable maybe being a bit more ambitious?

At this stage, really, we haven't focused on anything else. Look at net cash, which is interesting. We -- of course, we have a very positive net cash, but that is around the Kibali. But without Kibali, our net cash wouldn't have grown that much. So we'll see. When we are generating a lot of net cash without sort of extraordinary things, we can talk again. But right now, I think the policies will stay.

The next question is from Jared Hoover of Morgan Stanley.

A couple of questions from my side, please. First, just on your guidance. I know you've guided to having a much stronger second half on the first half. But I think at the beginning of the year during your -- in February during your full year results, you mentioned that there was going to be a 45-55 split of production for the full year. So I just wanted to see if that is more or less still intact, that would give me a good guide as to what is to come for production in the next quarter.

And then aligned to that, I just wanted to confirm that, I think, Christine, you mentioned that cash costs and all-in costs will trend towards the top end of the range for the first half of the year. Because if that is the case, then it looks like you're looking at a cash cost of about $990 for the second quarter. So I just wanted to confirm that, please.

Then my second question is on Sunrise Dam. I think, Alberto, you mentioned that the cash cost profile is going to be about $1,100 for the next 2 to 3 years. I just wanted to find out what is driving that? Is that a factor of it being a refractory ore body and you're not necessarily having the infrastructure to get the recoveries up quite meaningfully? Or is it a factor of prioritizing short-term production over longer-term development because of the COVID situation in Australia? I'll leave it there for now and then I'll follow up with one more.

So in terms of production, it's still what we said is intact, but you're right that 45-55. So we do expect more production and so that also spills over. We expect better cash cost in the second half than in the first half. Also, this is driven by what I said before on Geita. Geita has -- Geita and Obuasi, probably and Kibali, but Geita and Obuasi has a very significant impact on the cash cost of the company. And both, we expect to have a significant better second half. So that will pull everything down. Having said that, we do expect to be on the probably higher end on cash costs and all-in sustaining costs, still within range, but on the higher end.

If we talk about Sunrise, what I said is that we can get after full asset potential, so not in the short term, but in let's say, 2 years or 3 years in the $1,100. That ore body is an interesting one, but it's just -- it's the geology of the ore model. The grade is not very high. It is a very expensive jurisdiction. And yes, we -- I visited recently and just examples, but the ore body requires that we go down to grind it to 10 microns, which is a size about 10x smaller than what Tropicana needs, for example, to get the gold out.

So it's just by geology, I think more that -- it's nothing. In the long run, much more than that. It will be probably difficult to have it ever like an African operation. But having said that, it is in -- obviously, in a very good jurisdiction. And together with Tropicana, it will be a very profitable operation at most gold prices that we can see. But it might be on the high end of the cash cost of all of our operations.

Yes, yes. Okay. So then I guess my follow-up to that is, I mean, at $1,100 cash cost, it probably still looks like a bit of an outlier in the AngloGold portfolio, although you might be making money from it, depending on what the gold price is. But I think one of your earlier comments, you also mentioned that Tropicana and Sunrise, again, complement each other. So apart from the fact that they're in the same jurisdiction and potentially sharing overhead costs, are there any other synergies between the 2 mines that might make you want to keep it within the portfolio? I'll leave it there.

Yes, there are some -- obviously, it is a business unit that is -- that obviously attends both of them. But it is -- when you look at risk profile, it's not only profits, but discount rates and all of that. I have to say, we looked at it for a while. But at $1,I00, think we -- it is still worth more inside the AngloGold and outside.

And Christine, you wanted to clarify something?

Thanks, Alberto. So you're completely correct on the H2 is really where we see the cash cost improvement coming through. I just wanted to clarify for Jared, in Q1, you can expect to see cash costs slightly higher. Of course, as we spoke, there's also the Brazil rainfall impacts that actually do compound that. But then -- so expect to see cash costs a bit higher than what it currently is in Q2, and then it comes down in the second half of the year.

So just to clarify, Christine, you meant 2Q cash costs will be higher than 1Q or higher year-on-year?

It will be higher than both last year's half year number and it will be higher than Q1.

Okay. Perfect. Great. All the best on your next chapter, Christine.

Thanks, Jared.

The next question is from Tanya Jakusconek of Scotiabank.

Just Christine, if I have you on, just to continue on the guidance or even Alberto. Thank you for giving us the 45-55. Can I just confirm that you mentioned it's going to be quarter-over-quarter improvement through the year so that would imply a better Q4 and Q2 slightly better than Q1 operationally on the production side? Or should we look at it flattish in Q1, Q2?

I probably don't want to get too much into -- I'm sorry, into now giving guidance per quarter. I would just say that, directionally, Obuasi, which is an important one, obviously, will have a better Q2 than Q1 and then a much better H2 than H1. I can also say that Geita will have a better H2 -- Q2 than Q1 and a better H2 than H1 as we get into Nyamulilima, into zones with better grades. So I think both of them will have an impact. But I don't want at this stage saying expect -- Christine already told you, well, we'll see -- in cash costs, we should see something worse. But yes, let me keep it at the yearly level for now.

Okay. Could you provide then just maybe on the capital level, just how the distribution would be over the year? Like I think we had been guided that the first half would have heavier spending total than the second half and maybe just so our all-in sustaining costs, would you be able to give us a bit of guidance on that first half, second half?

We have planned for a 55-45. At this stage, it may be probably going more to a 50-51. I would probably put that in the models more around that 50-50.

Okay. That's very helpful. And then maybe I just wanted to ask a general question on just -- we've talked a lot about inflationary pressures that you've seen in your cost structure, and we really appreciate some of those insights in especially on the labor and some of the others. Can we talk a little bit about what inflationary pressures you're seeing on the capital side, given that you do have some projects that you are moving forward on Gramalote being one and obviously Obuasi expansion and then ultimately, Quebradona. So just for us to understand what sort of inflationary pressure should we be thinking about in those capital costs?

Yes, we are seeing probably similar or higher levels of cost pressures in projects. In a lot of these, we are still on feasibility. So we're not going into execution yet. But preliminary, I can say that we are seeing, yes, 8% and even 10% sort of pressures. So it is an issue. It will become an issue.

And do you feel that it's just the pressures -- anything that would impact timing of any of these projects slippage because of the supply chain issues and/or COVID?

No, not at this stage. We're actually -- it's not related to that. I think the big -- we're -- Obuasi is really -- not really -- I wouldn't say that it's really affecting timing. It may be -- it creates some complexities in terms of, for example, the [place] plant being a bit more delayed. But I wouldn't say at this stage that it's creating issues. Certainly, we don't see issues in Nevada. So not -- it's more the cost pressures that will -- we are seeing in overall. Probably, in Obuasi, it's going to be another 10%, 11%, something like that of cost pressures more than we thought it was going to be.

Okay. That's very helpful. And then maybe if I could ask just one final one. You mentioned, Alberto, the decline in costs at Siguiri in that sort of $900-ish level down from, I think, you said over $1,000 or thereabout. Is that still part of that asset improvement program that we would see that in a couple of years' time? And what's driving it?

Yes. Yes, yes, no. That is exactly that. Just better and it's all around -- it's going to be on basically metrics of productivity and mine planning, better mine planning.

Appreciate the insights. Christine, all the best to you.

Thank you, Tanya.

Ladies and gentlemen, we have no further questions in the queue. And I'd like to hand the call back to Mr. Calderón for some closing comments.

Okay. Well, thank you all for your questions, your participation. And we -- I am not accustomed, but I'm beginning to get accustomed to this that we meet so frequently every 3 months. But let me just close with repeating our message. We are -- it's a long road ahead, but we are happy how we're progressing. We're happy with the people, we're happy with the predictability. And yes, we hope to keep delivering. I will be biased more towards delivering and committing or promising too much. But yes, we will be talking quite frequently. So thank you all.

Thank you very much, sir. Ladies and gentlemen, that concludes this event, and you may now disconnect.