EDITORIAL: No need to read between the lines on AngloGold’s JSE exit

Even though it came largely as no surprise, AngloGold Ashanti’s announcement to sever more than a century’s ties with SA is a painful reminder of the country’s more than decade-long economic decline and loss of competitiveness.  

Last week, AngloGold, the world’s fifth-largest gold-mining company, said it would move its primary listing to New York and its corporate base to the UK.

For readers of this newspaper, the announcement has been a long time coming. In 2020, AngloGold offloaded Mponeng Mine, with surface assets and the mothballed TauTona and Savuka mines, to rival Harmony Gold for $300m, removing a profitable but risky asset in its portfolio to better compete with larger rivals Barrick Gold and Newmont.   

It is worth noting that the assets were sold for a steal. They brought in more than R8bn in revenue and delivered posttax profit of R331m in the year to end-December 2019. The value on the books of AngloGold was nearly R10bn. Based on the financial performance of the working mine, one would have thought AngloGold would have been less frantic to get out of SA and hold for an offer that reflects the mine’s operational appeal.  

The next logical step to take for the AngloGold board and executive was to move the company’s primary listing to a deeper capital market such as New York or London. They took that step last week when the company announced the former will be home to its equity, striking a heavy blow to SA’s credentials as one of the go-to, primary gold equity-trading hubs. 

To be sure, AngloGold’s move is good for shareholders. To start with, the shift takes the company to what has become the epicentre for equity gold trading. The New York stock exchange is home to two of the world’s biggest bullion miners, Barrick Gold and Newmont, as well as some of the world’s biggest gold mining ETFs, such as The VanEck Gold Miners ETF.  “It’s where the largest pool of capital by far is. It’s where the specialist investors who like gold are,”  AngloGold CEO Alberto Calderon told Bloomberg shortly after the announcement.   

Supplying weapons

And the numbers back him up.  About two-thirds of AngloGold’s R200bn (or just more than $10bn) shares already change hands in New York, where the company has listed depository receipts, underlining how hungry US investors are for the bullion. It is not hard to imagine that investors would pile into the stock that carries next to zero currency and country risk, and advance AngloGold’s long-standing goal of closing the valuation gap between it and larger rivals Newmont Mining and Barrick Gold.

Granted, the market size of Barrick and Newmont — worth about $33bn and $36bn, respectively  — is down to them producing more gold at lower cost, but it is also a sign that investors are wary of holding shares denominated by the volatile rand.

The timing of the announcement could not have been better for Calderon. It came in the same week when the rand slumped to a record low after US Ambassador Reuben Brigety accused SA of supplying weapons to Russia. 

For Ramaphosa’s administration, the timing was inopportune as it shone a harsh, unforgiving spotlight on his stewardship of the economy. Ramaphosa has presided over an economy that has been stuck in a downward spiral for more than a decade, undermined by paralysing power cuts, a barely functional rail system and regulatory uncertainty. And the result: SA is one the world’s 10 worst countries for mining investment, according to the Fraser Institute’s Annual Survey of Mining Companies. The survey polls global mining executives to get their perspective on the investment potential of global mining jurisdictions based on mineral potential, ease of doing business and government policies.

To that list of worries about SA as an investor-friendly emerging market, one can justifiably add the risk of SA causing enough damage to its relations with the US that the superpower would have little choice but to cut it off from African Growth and Opportunity Act. Our shameful friendship with Russia has rightly prompted commentators to say that our non-aligned stance in the former Soviet Union’s war against Ukraine is only on paper. 

In such an environment, it should be an easy pitch for Calderon to AngloGold’s shareholders to back the deal, which requires 75% of the vote to get over the line. But it is another piece of evidence of the damage brought by the rudderless leadership of the country that has caused bullion output to decline steeply since 2008.