Bobby Godsell, CEO, AngloGold Ashanti
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Anglo's decision hangs over AngloGold
Allan Seccombe
Posted: Thu, 27 Jul 2006

[miningmx.com] -- ANGLOGOLD Ashanti wants parent company, Anglo American, to divest itself of its gold unit shares by a dividend in specie as this would be the least disruptive process, said the gold firm's CEO, Bobby Godsell.

In terms of a dividend in specie, Anglo American shareholders would receive a proportional number of AngloGold Ashanti shares.

Anglo American is divesting itself of non-core assets and has said it will dispose of its 41.8% in AngloGold Ashanti within two years. It trimmed its stake from 51% earlier this year.

Godsell said there were three options for Anglo to handle the process. The first would be through the placement of shares, which would see 115 million shares coming onto the market, which could be deleterious to AngloGold Ashanti’s share price.

The second is through merger and acquisition (M&A) activity which would dilute Anglo’s stake or result in an exchange of its holding in AngloGold for another asset class. The third option is a de-merger or a distribution of the AngloGold shares as a dividend in specie.
find ways for Anglo to exit
“I think a quick and complete exit would certainly be in our interests and the de-merger offers the simplest example of that,” Godsell told analysts during a presentation of AngloGold’s June quarter results.

“It is my job as CEO of this company to try keep the options open and try find ways for Anglo to exit that makes value sense for them and leaves this company best positioned to go compete in the gold industry,” he said.

Analysts say AngloGold’s shares are trading at a discount because of the overhang of 115 million shares.

"We seriously doubt that investors will be prepared to push the group's valuation in the face of the overhang, and on this basis we see a risk of underperformance of peers," said JP Morgan precious metals analyst, Douglas Orsmond, who has an "underweight" recommendation on the share.

There is a very close relationship between the two companies and Anglo was likely to consult quite closely with AngloGold on how to handle its exit, said David Davis, an analyst with Credit Suisse Securities.

Godsell serves as a non-executive director on the Anglo American board.

Of the three options, the placement was most likely to be the option taken by Anglo, said another analyst, because “it’s the one lever they can pull themselves.”

“I don’t think the de-merger is a real one, but AngloGold looking to do an M&A deal is probably quite real,” the analyst said. AngloGold would have to find a target of a relative size to dilute Anglo.

Of course, there could be a blend of the options into something that would soothe the market, a third analyst said. "This is not something Anglo is just going to rush into."

Godsell declined to be drawn on whether AngloGold was looking at the TEAL Mining and Exploration’s gold find at Otjikoto in Namibia where AngloGold has its 88,000 oz Navachab gold mine.

“There’s nothing I can say publicly about it… all I can say is we are a company that has lots of partnerships. We favour partnerships where risks and rewards can be equitably shared,” he told Miningmx.

There has been speculation that TEAL has considered engaging AngloGold about merging Navachab with its one million resource ounces deposit. TEAL is aiming to double its resources there over the next year.
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On the growth-in-ounces front, AngloGold will bring to its board the Moab and Mponeng deepening projects to go below infrastructure after dusting off these shelved plans because of expectations of a higher gold price.

The Mponeng project will be presented to the board before year-end. The bigger Moab project, which will go deeper, is being re-engineered and that process should be completed in the first quarter of next year before coming to the board.

Exploration expenditure rose 50% in the second quarter to $27m.

“We are more focussed and better directed in our green fields exploration. I’ve got very high hopes that the DRC will render us a mine. I’ve got good hopes that we’ll find a mine in Colombia and I’m very excited about the Tropicana deposit in Western Australia,” Godsell said.

AngloGold will produce more uranium next year, growing output to 75 tonnes/month from this year’s 69 tonnes/month.