AngloGold Ashanti advised to give up on South Africa


AngloGold Faces South African Dilemma as M&A Gold Rush Quickens

By Felix Njini
Bloomberg News
Sunday, January 20, 2019

Two decades ago Anglo American Plc created the world's No. 1 gold miner by merging its South African assets. Having long since been eclipsed by its rivals, AngloGold Ashanti Ltd. may need to leave home to keep up.

Newmont Mining Corp. and Barrick Gold Corp. have forged mega deals that will extend their lead over AngloGold. Saddled with Mponeng, the world's deepest mine in a dying South African industry that's struggling to contain costs, the third-biggest producer could boost its value by leaving the country, according to Rene Hochreiter, analyst at Noah Capital Markets in Johannesburg.

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"Their best bet is to get out of South Africa and leave Mponeng behind," he said. "The costs never come down in South African gold."

That would be the final step in AngloGold's gradual withdrawal from South Africa. The country contributed just 14 percent of its output in the third quarter of last year, down from 26 percent a year earlier, after the company sold and shut mines to stem losses.

Now AngloGold is considering hiving off its South African operations and listing in London or Toronto, people familiar with the matter said last month. Listing in London would give the company exposure to a big pool of investors with very few options to buy into gold equities, following Barrick's acquisition of Randgold Resources Ltd.

A spokesman for AngloGold declined to comment.

To exit South Africa, the company would need to offer a steep discount on its assets, said Leon Esterhuizen, an analyst at Nedcor Securities Ltd. That still wouldn't be enough to interest international companies.

"They are not going to invest here," Esterhuizen said. "Whether it's AngloGold or anybody else in South Africa gold, it makes sense to go and find other places to make money."

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