AngloGold Ashanti , the world No. 3 gold miner, reported record-breaking quarterly earnings on Wednesday, beating forecasts as bullion's bull run filled its coffers.

The average gold price rose 13 percent to just over $1,700 an ounce during the third quarter, compared with the previous quarter, boosting the miner's earnings, and AngloGold said it would move to paying dividends on a quarterly basis, with this one set at 90 South African cents.

Chief executive Mark Cutifani said in a conference call the company expected to turn in another strong fourth quarter on the gold price as he stuck to forecasts that it could hit $2,200 an ounce in 2012.

He said group would fund its dividends from cash flow, not by borrowing and would not tie its dividend policy to the gold price, although analysts said payments to shareholders would ultimately depend on bullion's performance.

The group previously dished out dividends on a half-yearly basis but cash flow has improved significantly since it eliminated its hedge-book, which involved gold sold forward or covered by derivatives.

The hedge-book had previously at times curbed cash flow, but the company now has full exposure to the gold price, which scaled record peaks in September and remains near historic highs.

The hedge restricted them and hence they had relatively low dividends but now they have a good free cash flow, said David Davis, mining analyst with SBG Securities in Johannesburg.

They should be able to make regular dividend payments with a continuous upward trend in the gold price, he said.

Cutifani also said the group would generate enough cash to fund its growth projects and remained on track to lift output to a forecast 5.5 million ounces by 2014.

The target for 2011 was revised down slightly to 4.33 million ounces because of increased safety stoppages in South Africa and a slow ramp-up at the Sunrise Dam mine in Australia, where output earlier this year was negatively impacted by heavy rains.

Cutifani said an increase in output should kick in in 2013 depending on the timing of commissionings and projects.

They have a significant growth programme. They have seven board-approved projects right now which is around $1.3 billion and that should increase their output by 800,000 ounces in the next 2 to 3 years, Davis said.

WEAK CURRENCIES, GLOWING GOLD

AngloGold gets about 40 percent of its output from South Africa and has a Latin American presence. Regional currency weakness against the dollar -- which spot gold is priced in -- also helped to boost margins. The rand/gold price was up about 20 percent in the quarter.

Adjusted headline earnings per share rose 25 percent to 118 U.S. cents in the July-September period from 89 cents in the previous quarter. That beat a Reuters poll of six analysts which had forecast a result of 113.4 U.S. cents.

In total, the group said adjusted headline earnings were a record $457 million.

AngloGold's share price was down 0.40 percent in afternoon trade as the wider South African equities market fell over 2 percent in line with global peers.

But it was off intra-day lows as gold edged higher on persistent doubts about Italy's ability to tackle its debt crisis. Gold rose 0.6 percent to $1,795.19 an ounce by 1320 GMT from $1,784.85 late in New York on Tuesday.

In the year to date AngloGold's share price is up just over 16 percent, lagging an almost 20 percent increase in the Johannesburg bourse's gold mining index