Mark Cutifani, CEO, AngloGold Ashanti
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» Cutifani cuts AngloGold structure
» AngloGold braces for hedgebook pain
» AngloGold may sell mines
» AngloGold attracts vote of confidence

» JSE:ANGLOGOLD ASHANTI LIMITED:
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Cutifani mulls sales, acquisitions & profits
Allan Seccombe
Posted: Mon, 12 Nov 2007

[miningmx.com] -- THE EXIT OF Anglo American as the majority shareholder in AngloGold Ashanti has cleared the way for the world’s third-largest gold producer to chart its own future, most particularly when it comes to acquisitions. Anglo American has a clear strategy of extricating itself from the gold miner and has reduced its stake to 17% from more than 50%.

The move is a welcome development for Mark Cutifani, the Australian who replaced Bobby Godsell as CEO at the start of October. “We’ve got a clear strategic runway where we’re the masters of our own destiny,” says Cutifani. “It’s not meant to be a criticism of Anglo American; it just means we can drive our strategy and create more value for our shareholders.”

Anglo American has taken a hard look at its assets, and AngloGold Ashanti was one that just didn’t fit the new focus on base and ferrous metals. Anglo CEO Cynthia Carroll and René Médori have left the AngloGold Ashanti board.

AngloGold was constrained in its growth strategy at times because Anglo American was uncomfortable about paying the premium associated with gold shares relative to the underlying value of the assets in order to keep its controlling position.

That impediment is gone.

“With Anglo relinquishing control of the group and Cutifani’s new approach, it appears to us that the outlook for AngloGold Ashanti is changing for the better,” says JP Morgan gold analyst Steve Shepherd.

“A focus on improving safety, changing the portfolio of operations the group has to manage around the globe and reducing its hedge book could be positive for the share’s rating in our view,” Shepherd says in a note.

AngloGold is undergoing a three-month review of its portfolio of 21 mines, a number of exploration plays and an annoying hedge book, which hacked $59/oz out of the average price of $680/oz it would have received if it had been un-hedged in the three months to end-September.

AngloGold changing for the better
Cutifani says he’s no fan of hedging, having been at Australia’s Sons of Gwalia, which was sunk by an unfavourable hedge book. AngloGold will make announcements regarding its assets, hedge and exploration plays around February or March next year. AngloGold could sell some of its smaller mines, which require a disproportionate amount of management effort in relation to the value they deliver. That could include its operations in Mali.

Cutifani is clear that size isn’t an issue for AngloGold under his watch. He wants every ounce the company produces to make it money and if it means getting rid of some mines that’s the way it’s going to be. There are five or six mines that need special attention, he says. The troublesome Obuasi (in Ghana) and Geita (in Tanzania) mines are important assets for AngloGold in Africa and it’s likely to try restore them to sustainable profitability rather than sell them.

“I’d like to grow profits. That’s the first objective. I’d like to grow them safely. That’s key,” Cutifani says. “The conversation we’re in is: ‘Let’s not focus on being the number one producer; let’s focus on being the number one profitable gold company in the world’.”

Safety is paramount for AngloGold. Off its own bat it shut down its TauTona mine in South Africa after two workers died underground in one week. Cutifani says production levels are of less concern to him than safety.

He backs Godsell’s thinking on exploiting the record high gold prices to make its South African mines, already the deepest in the world, deeper yet to tap into unexploited gold resources.

“I think he’s (Godsell) absolutely right, but we’ve got some work to do on the safety and productivity aspects. The two go hand in hand. What you’ll see me focus on over the next year or two is what processes we have in place to work out how we extract gold at those depths safely and economically.”

Acquisitions aren’t out of the question. In fact, they could form part of the strategy to deal with the hedge book by bringing additional un-hedged ounces into the company through merger and acquisition activity.

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Asked about Papua New Guinea – in particular, Harmony Gold’s assets – Cutifani says: “We’ll run our eye over them for sure. We’ll look at all sorts of things.” Acting Harmony CEO Graham Briggs has said it wants a single partner on all its PNG assets and should have such an agreement in place before mid-2008. While PNG is possibly flavour of the month for a number of gold companies, AngloGold does prefer South America and Colombia in particular, Cutifani says.

A genial Australian with an extremely short haircut, Cutifani is clearly a rugby fan. He says he was mercilessly ribbed in its South African headquarters about Australia’s early exit from the Rugby World Cup. He was presented with a South African rugby jersey, which he wore on the Friday before the final game. “Australians become spiteful when we lose. We’ll probably try to poach your coach,” he says with a wry smile.