AngloGold may leave SA in 2020
Sale of last local assets, including Mponeng mine, will mark a full exit from its historical home
AngloGold Ashanti expects to agree to a sale of its last SA assets in the first half of 2020, marking the end of its exposure to the country.
AngloGold Ashanti expects to agree to a sale of its last SA assets in the first half of 2020, marking the end of its exposure to the country.
Analysts flagged an upward re-rating of AngloGold’s shares if it eliminates exposure to SA, which is considered by investors as a risky investment destination for miners because of regulatory uncertainty, Eskom electricity price increases and constraints, labour unrest, and rising and untenable levels of debt in state-owned companies that threaten the economy.
“The process is going very well, exactly according to plan. There is very strong interest by a qualified list of bidders,” CEO Kelvin Dushnisky said.
“The site due diligence visits by bidders is now complete and the next phase is for us to receive definitive bids, which we’re expecting over the coming weeks,” he said, declining to give a number of bidders.
“We would expect to update the market before the end of the year on our progress.
“Presuming we got to a point where we are prepared to transact, that won’t happen until the new year,” he said.
UNDERGROUND MINE
“There are a lot of pieces to be put in place for a transaction this size, so it will be in the first or second quarter.”
Having reduced its SA asset base to a single underground mine at Mponeng, the world’s deepest mine at 4km below surface, and a tailings retreatment operation, AngloGold has opted to sell the remaining assets.
The sale of the SA assets and successfully concluding the rebuild and restart of its Obuasi mine in Ghana, combined with moving its primary listing out of Johannesburg to London, could result in a positive re-rating of AngloGold’s shares, said James Bell, an RBC Capital Markets analyst.
“Looking beyond Obuasi, it is the potential for a move in primary listing to London that could drive a bigger re-rate.
“This would provide a third large-cap gold name to a UK market in need of new exposures,” Bell said.
AngloGold has argued that it can receive better returns on capital investments elsewhere in its portfolio.
A multibillion-rand investment is needed at Mponeng to extend its life to more than 20 years beyond its existing eight years. The most likely buyers are Harmony Gold and SibanyeStillwater, which have gold mines close to Mponeng.
AngloGold is also selling mines in Argentina and Mali, with new entrants coming into the bidding process for those assets, Dushnisky said, repeating that there would be “no fire sale” of any of the three mining operations it wants to sell.
AngloGold reported improved production and cash flows in the third quarter of its 2019 financial year but warned annual output will be at the bottom end of its guidance and costs at the top of the range.
AngloGold, one of the world’s top five gold miners, produced 825,000oz in the three months to end-September, a 3% decrease from the same period a year earlier, while its free cash flow jumped 156% to $87m.
The $545m Obuasi project to redevelop the unprofitable mine remained on track both in timing and budget, Dushnisky said. The first gold pour at Obuasi is on track for the end of 2019.
GUIDANCE
Full-year production guidance is for between 3.25-million ounces and 3.45-million ounces, with all-in sustaining costs forecast at between $935/oz and $995/oz.
AngloGold said it maintains its guidance but it foresees production at the “lower half of the range, costs at the upper end of range”.
It noted lower grades and “teething issues” at some operations, while inflationary pressures ticked up during the third quarter.
THERE ARE A LOT OF PIECES TO BE PUT IN PLACE FOR A TRANSACTION THIS SIZE, SO IT WILL BE IN THE FIRST OR SECOND QUARTER