AngloGold Ashanti undergoes restructuring

AngloGold Ashanti says it is exploring various possibilities to restructure its international mining operations to ensure strategic business transforming to improve efficiency and competitiveness against the backdrop of a 25% fall in the global gold price.

Accordingly, AngloGold Ashanti has applied for and received approval from the South African Reserve Bank (SARB) to restructure its international mining operations under a new UK holding company called ‘Newco’.

This restructuring will be subject to approval of the shareholders of AngloGold Ashanti. Under the new split AngloGold will have a 65% stake in the new company while existing shareholders will receive the remaining 35%.

Newco intends to seek a premium listing on the London Stock Exchange, an inward listing on the Johannesburg Stock Exchange (JSE) and a listing of American Depositary Receipts (ADR) on the New York Stock Exchange (NYSE).

The intention is that Newco will hold AngloGold Ashanti’s portfolio of gold production and exploration assets located outside South Africa, and the decision when approved by regulators and shareholders is expected to be executed in 2015.

The split will see AngloGold Ashanti’s brand and logo change in Ghana and all other operations it has across the world, with the exception of South Africa.

Executive Vice President Sustainability of AngloGold Ashanti, David Noko in an interview with B&FT in Accra said: “AngloGold Ashanti will continue to remain a South African-domiciled business that focuses on maximising the value of its current portfolio; and over time the intention is that it will consider developing a multi-commodity growth strategy in South Africa and beyond.

“The South African regulatory authorities have been supportive in clearly understanding the strategic rationale of this proposed transaction, and also the benefit to be unlocked given our specific set of circumstances. 

“Each business will have greater focus and separate identities which enable them to chart distinct, value-creating strategies going forward.”

Top executive directors of the company, including the CEO, are currently on a roadshow to convince shareholders to buy into the new plan. This will also lead to a rights issue that will see shareholders of the company inject some capital.

Anglogold Ashanti currently has a huge debt portfolio that stands at about US$3.6billion. Like many other mining companies, it has over the past three years recorded some losses due to a plunge in global gold prices among others.

The drop in revenue as well as some operational challenges this year pushed the mining giant to restructure its 115-year old Obuasi Mine in the country.

Kwame Addo-Kufuor, Vice President, Corporate Affairs of AngloGold Ghana, on the separation from the restructuring explained that the board has concluded current debt levels are too high, and therefore an equity capital raising effort in the form of a rights issue to AngloGold shareholders is being contemplated, whether or not the proposed restructuring occurs.

B&FT has gathered that AngloGold Ashanti is potentially targetting gross proceeds from the contemplated rights issue of approximately US$2.1billion in order to be able to pursue the restructuring process.

The proceeds will be used to predominantly to repay existing debt by initially redeeming 35 percent of the aggregate principal amount outstanding of the company’s 2020 8.5 percent bonds, under the provisions of the related indenture that allows the company to redeem bonds from the net cash proceeds of an equity offering.

On global operations, AngloGold Ashanti Limited has made significant progress in the past two years in transforming its business to improve efficiency and competitiveness against the backdrop of a 25% drop in the gold price.

The company has returned to production growth, commissioned two new projects and significantly reduced costs.

In the second quarter of 2014, compared with the corresponding period a year earlier, production rose 17% to 1.098million ounces (oz), all-in sustaining costs fell 19% to US$1,060/ oz, and these results were achieved while posting a record safety performance.

Meanwhile, under the new split no major positions will be affected; however two board-members of AngloGold will resign to join the new company when established.

Newco will be led by CEO-designate Charles Carter, along with President and Chief Operating Officer, Ron Largent, who will be joined on the executive team by Graham Ehm, Maria Sanz Perez and David Noko. A new CFO will be recruited for Newco in due course.