Anglogold restructuring will unlock further values —Exec. Vice President

AngloGold Ashanti Limited says its restructuring project will enable the company to unlock further values in the business.

Speaking to a section of the media in Accra yesterday to officially announce the commencement of the process David Noko, Executive Vice President in charge of Sustainability, AngloGold Ashanti, said the restructuring was driven by drop in gold price on the international market.

AngloGold Ashanti is restructuring its operations by spinning off its international assets into a new, London-listed company and raising $2.1 billion in a rights issue.

AngloGold Ashanti intends to list 35 per cent of the shares in the new company holding its international assets on the London Stock Exchange LSE.LN -0.58 per cent and retain the remaining 65 per cent.

AngloGold Ashanti would meanwhile retain its Johannesburg and New York listings and focus on its operations in South Africa. Both companies will be renamed after the restructuring.

The company intends to use the rights issue to fund the restructuring and make the South African operations debt-free.

Both the restructuring and the capital raising are subject to shareholder approval. The demerger will take place in the first half of 2015, and the share issue will happen beforehand.

Mr. Noko said the company was of the view that the separation into separately-listed vehicles would allow independent management teams to execute distinct strategies in order for each entity to compete as effectively as possible in the context of the current industry and macro-economic environment.

He further explained that simplified portfolios would allow each management team to accelerate initiatives to improve productivity and operating costs and to realise the potential where appropriate of their growth opportunities whilst also allowing for flatter and more cost-effective overhead structures.

This, in turn, he said, would enable the combined corporate costs of both entities to be materially reduced. AngloGold Ashanti has made significant progress in the past two years in transforming its business to improve efficiency and competitiveness, against the backdrop of a 25 per cent drop in 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 per cent to 1.098Moz, all in sustaining costs fell 19 per cent to $1,060/oz, corporate and marketing costs were down 65 per cent to $20 and EBITDA was up 33 per cent to $382m.

Mr. Noko said after the company evaluated options to unlock further value in the business, it was decided to explore the possibility of restructuring AngloGold Ashanti into a simpler and more focused entities to realise the potential of the current portfolio.

“It has become increasingly clear that the two distinct parts of our portfolio require different strategies, focused management and should be appropriately capitalised to realise their full potential and unlock further value for shareholders,” said Chairman Sipho Pityana in a statement issued by the company.

“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,” Chief Executive Officer Srinivasan Venkatakrishnan said.

“These two very distinct sets of assets will benefit from the more focused structure and capital allocation,” he added.

Based in Johannesburg, AngloGold Ashanti has 20 gold mining operations in 10 countries, as well as several exploration programmes in both the established and new gold producing regions of the world.

In 2013, 32 per cent of AngloGold’s gold production came from South Africa while the remaining 68 per cent came from outside the country.