ANGLOGOLD Ashanti may sacrifice some value in order to deliver on its strategy to sell its remaining South African assets.
This is the view of RBC Capital Markets following a news report by Bloomberg News on February 10 that AngloGold Ashanti had chosen to sell its Mponeng mine and surface asset Mine Waste Solutions (MWS) to Harmony Gold.
Citing people familiar with the proposed deal the newswire said AngloGold had “picked” Harmony. Harmony bought Moab Khotsong from AngloGold for $306m in cash in 2017.
Mponeng, the world’s deepest mine, produced 265,000 ounces of gold in 2018, while output from the surface operations totalled 171,000 oz, said Bloomberg News. The assets accounted for 13% of AngloGold’s production that year, it added.
According to James Bell, RBC Capital Markets analyst, AngloGold may have taken into account the certain operational risks when deciding to sell the South African assets. One of these risks is continual power interruptions owing to breakdowns at Eskom.
This is despite a $150 per ounce advance in the gold price to about $1,500/oz today compared to the prevailing $1,400/oz gold price at the time AngloGold Ashanti CEO, Kelvin Dushnisky, announced the plan to sell the South African mines.
“Whilst management’s mantra of ‘no fire sales’ still holds we continue to think that strategic rationale of a sale may trump a straight valuation call, especially as it could unlock the next steps for the group’s strategy,” Bell said.
If completed as speculated, AngloGold will set about plans to seek a primary offshore listing, effectively delivering on a strategy first mooted by Dushnisky’s predecessor, Srinivasan Venkatakrishnan who wanted to spin out the South African mines.
According to Bell, the market had expected Mponeng and MWS to be sold towards the end of 2019 and, therefore, today’s speculation might be viewed favourably.
Sibanye-Stillwater CEO, Neal Froneman, told BusinessLive last week that the company was interested in adding to its gold production, but considered South African to be ex-growth. Another potential bidder for Mponeng, Heaven Sent Gold Group, ran into financing problems in January following its failure to list in Hong Kong.
Heaven Sent operates Village Main Reef which bought Tau Lekoa and Kopanang from AngloGold Ashanti. Heaven Sent has undertaken to protect some 6,000 jobs at the mines despite the financing difficulties.
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