R500m boost from uranium sales
Driving debt levels down to manageable levels
ANGLOGOLD ASHANTI will generate an extra R500m in revenue from its uranium business this year as it takes advantage of increased production and bigger exposure to the spot market, says CEO Mark Cutifani. AngloGold Ashanti, South Africa’s largest producer of the energy metal, will produce 1,3m lb of uranium this year, around 100 000 lb more than last year.
It cancelled 1m lb of outstanding uranium contracts last year at a cost of US$32m. However, it does mean it will receive a price of around $50/lb instead of the contracted $25/lb.
That’s just one of the deals done by the dynamic Cutifani, who took over the company towards end-2007. He’s restructured AngloGold Ashanti and its balance sheet and cut its onerous gold hedge book or forward sales by half, improving the price it receives for each ounce it sells.
The extra uranium revenue will play a role in driving net debt down to an entirely manageable $300m by year-end 2009 from well above $1bn. That will give AngloGold the room it needs to manoeuvre in adding 2m to 3m oz to production that, net of replacement ounces, will lift production to 6m oz in five to seven years.
“RBC Capital Markets has little doubt AngloGold Ashanti could well continue to over deliver on its promises, But given its own guidance and a $900/oz gold price, RBC Capital Markets can only maintain its current target price of R320/share,” the company says in a note.