AngloGold Ashanti will make no further sales of assets in SA as it focuses on ramping its large core Mponeng mine into full production and invests heavily in a number of international projects to boost production.
An agreement with the Ghanaian government was expected to be reached in early 2018 so that the world’s third-largest gold miner could make a decision on what to do with its suspended Obuasi mine, CE Srinivasan Venkatakrishnan said on Monday.
AngloGold’s exposure to gold from SA will fall to 13% — from 40% of group output a decade ago — as it closes its large TauTona mining complex at a restructuring cost of $64m and sells its Moab Khotsong operations to Harmony Gold and the Kopanang mine to China’s Heaven-Sent for a combined total of about R4.2bn. It will use the money to repay debt.
"The board is looking at SA like it would any other jurisdiction. What we are doing with restructuring in SA, all those decisions had a specific reason," Venkatakrishnan said AngloGold had decided to allocate capital elsewhere in the group instead of the Zaaiplaats extension project at Moab.
The 4km-deep Mponeng mine, the world’s deepest mine, "remains a core asset for us" and the Mine Waste Solutions tailings treatment business, which has an agreement to sell about a quarter of its gold for $400/oz to Franco Nevada, a North American company, until 2023, was a long-life, highly cash-generative business, he said.
The gold price is $1,273/oz.
"Mine Waste Solutions is generating marginal cash flow, but once the legacy structure falls away, then the margins open up nicely," he said.
"It costs money to get out of that structure and you are far better off letting it unwind."
Analysts have suggested that by reducing its South African exposure, the company is far cheaper than its international peers and could become a takeover target.
"If you look at what we’ve achieved in the last five years … it was all funded from existing operations and a single asset sale. We’ve not diluted the shareholders by one cent.
"Our share price is undervalued for certain things beyond our control. There is a huge amount of value here," said Venkatakrishnan.
"Whether we are a takeover target or not, we can’t speculate. We are a listed company with a full free float. We will do whatever is needed to generate maximum value for our shareholders," he said.
AngloGold has largely spent the $350m at Mponeng to bring it into steady state production.
It will deploy the research and development work it had done at the suspended TauTona mine, earmarked for closure, at its Mponeng mine when the time was ready. The ground-breaking work was designed to extract just the reef using special drills, much like extracting just the jam out of a sandwich.
In the September quarter, AngloGold raised gold output to 997,000oz, up 11% from a year earlier and 9% higher than the June quarter.