AngloGold pumping cash
Miner ramps up dividend payment policy, aims to be net debt free
AngloGold Ashanti, the world’s third-largest gold miner, doubled its dividend payment policy and aims to be net debt free as its mines pump cash and have brought net debt levels to their lowest in nine years.
AngloGold, which has sold its remaining SA mines to Harmony Gold for $300m (about R4.9bn), of which $200m (R3.3bn) cash was received in the September quarter, is primarily an Africa-focused gold miner, with mines in the Americas and Australia.
Its CEO, Kelvin Dushnisky, resigned unexpectedly in July.
The interim CEO role is filled by CFO Christine Ramon, who said on Monday that there was no timeline for the board to appoint a new CEO.
She declined to comment on whether she was interested or in the running for the job.
Quashing media reports that the government had made the retention of its primary listing on the JSE a condition of the sale of the SA assets, Ramon said that though the talks were robust the final approval was unconditional.
This means AngloGold could at some point move its primary listing to another jurisdiction, but Ramon declined to put a timeline or motivation on such a decision.
With a potential movement of its primary listing from the JSE to better reflect its international asset base, AngloGold reported an almost 10 times higher free-cash flow of $516m (R8.4bn) for the first nine months of the year, compared with $55m (R895m) a year earlier.
Adjusted net debt fell to $875m (R14.2bn) from $1.65bn (R26.8bn) in the same period a year earlier.
Adjusted earnings before interest, tax, depreciation and amortisation (ebitda) rose to $803m (R13bn) in the quarter from $468m (R7.6bn) a year ago.
AngloGold adjusted its dividend policy to return cash to shareholders twice a year instead of once and to double the payout to 20% of free cash flow before growth capital.
“Management has enhanced the dividend policy, which was long overdue and likely contributed to the significant discount on the stock,” SBG mining analyst Adrian Hammond said in a note.
AngloGold put the $200m from Harmony towards reducing its debt.
It raised a $700m (R11.4bn) bond to repay expensive debt, and it has tens of millions of dollars locked up in Democratic Republic of the Congo (DRC), Tanzania and Argentina, held tight by difficulties in repatriating the money.
In DRC, for example, there is $359m (R5.8bn) due to the JSE-listed company that cannot be repatriated and AngloGold’s partner at the new Kibali gold mine, Barrick, is handling talks with the government to release the money.
In the quarter, the Geita mine in Tanzania and Cerro Vanguardia in Argentina both could not repatriate $130m (R2.1bn) and $25m (R407m) respectively due to various complications.
“When those cash flows come through it will bolster dividend payouts to shareholders and it will strengthen our position as well to self-fund our capital requirements,” Ramon said.
“Our philosophy is to have the lower debt the better.
“In fact, we’d like to have zero net debt on our balance sheet,” she said, adding this could be achieved during 2021.
AngloGold needs a minimum of $500m (R8.1bn) cash on its balance sheet to cover working costs and the $1bn (R16.3bn) it has on the books now is a comfortable position it would like to maintain.
AngloGold has to pay between $450m (R7.3bn) and $500m (R8.1bn) towards the Gramalote gold project it shares with B2Gold in Colombia over a two-year construction period.
Its wholly owned Quebradona project could cost up to $1.4bn (R22.8bn) and come into production in 2025, with the bulk of that spending in the last two years of construction in what will be AngloGold’s new large gold mine with a 23-year life generating 3-billion pounds of copper and 1.5-million ounces of gold.
AngloGold plans to self-fund both projects, Ramon said.
Quebradona will be the first source of copper in AngloGold, a welcome addition to what is essentially a single-commodity company apart from the silver it produces, Ramon said.
In releasing its September quarter production data, AngloGold did not give full financial data, but advised the market on its debt, cash and operational performances for the quarter and year to date. — BusinessLIVE
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