ANGLOGOLD Ashanti is the latest mining company in SA to split its assets, creating a debt-free local company that will become a multi-commodity player, and a large London-listed gold-focused company holding a suite of international mines and growth assets.
Two large operators in the South African mining sector have split their assets in the past two years. Gold Fields unbundled three deep-level, labour-intensive mines into a new JSE-listed company, Sibanye Gold, to allow Gold Fields to focus more fully on its international portfolio.
BHP Billiton has cherry-picked its best assets to retain in its portfolio and is creating a separate company to house the balance of its assets, which are largely in SA and comprise coal, manganese and aluminium.
AngloGold operates the deepest mine in the world — its Mponeng mine is 4km deep.
As part of its division process, which needs shareholder approval, AngloGold will need to raise $2.1bn, which will primarily go towards clearing most of its debt, which CEO Srinivasan Venkatakrishnan described on Wednesday as “too high”. AngloGold has about $3.5bn in gross debt.
The South African Reserve Bank, in its approval of the restructuring, demanded that the company housing the South African assets start debt-free.
Raising capital
The London-listed company, Newco, will retain the remaining debt of about $1.2bn in the two-stage restructuring process that could be completed by the middle of next year. AngloGold would have to raise capital even if the restructuring did not go ahead, Mr Venkatakrishnan said.
The key motivation for the split was to unlock value in both sets of assets, he said, and allow each company to follow its own strategies. Newco’s assets generate about 65% of AngloGold revenue and the mines in SA the balance, from output of 1.3-million ounces a year. Group earnings before interest, tax, depreciation and amortisation were $1.6bn, with SA making up about $450m of that.
AngloGold’s shares tumbled 14.6% to R143.98 on the joint announcement of the capital raising, which is equivalent to roughly a third of its market capitalisation of R61.3bn, and the restructuring. Analysts said the quantum of the rights issue had unsettled the market. “We believe the separate listing and potential rerating of its international assets, a focused management approach at both new companies, and the potential for higher cash returns to shareholders from its core South African operations, may prove catalysts to achieve our envisaged upside in the foreseeable future,” Citi said in a note.
Asked whether AngloGold’s decision to split its business was a vote of no confidence in SA, Mr Venkatakrishnan, who will head the South African business, said this was not the case.
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