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Anglo's road to dilution
David McKay
Posted: Thu, 24 Aug 2006
[miningmx.com] -- QUITE how Anglo American intends dispatching its remaining 41,8% stake in AngloGold Ashanti – the R98bn gold company – continues to intrigue. Certainly, there’s no agreement between the two personalities affected by the transaction. AngloGold Ashanti CEO Bobby Godsell would probably not prefer a placing of Anglo’s shares – 115 million – owing to the overhang it would create.
However, Anglo CEO Tony Trahar doesn’t prefer unbundling the AngloGold Ashanti stake to Anglo shareholders either. The mechanics of such a deal would be that AngloGold shares are paid to Anglo shareholders in a ratio to their shares.
While that would be the cleanest route for AngloGold’s Godsell, Trahar would be conscious of tax payable on “dividends” by his British shareholders. So unbundling would be a less desired means.
That leaves the third option: that AngloGold Ashanti controls its own destiny by seeking a merger with another company, thus diluting Anglo’s stake. For reasons of interest, Miningmx compiled the following table showing the extent to which AngloGold Ashanti could dilute its parent company.
Interestingly, Anglo can’t be fully vested of its AngloGold stake, regardless of what gold merger is completed. It’s also worth contemplating that the actual value of Anglo’s investment in AngloGold Ashanti is unchanged by such a merger.
A merger of AngloGold Ashanti with Barrick Gold, the world’s largest gold producer, would be the most dilutive but probably the most unlikely. Barrick is in the throes of buying compatriot firm NovaGold and is also digesting previous acquisition target Placer Dome. So it probably doesn’t have capacity for AngloGold.
Newmont Mining recently expressed an interest in regaining the No 1 position in the world’s gold mining industry in terms of outright production and market capitalisation. But is there a cultural fit between management of both companies?
Click on Image to enlarge
Kinross Gold is an option and it could be preparing for a takeover. It’s been suggested that one reason why Goldman Sachs recently halted research on the company was because its corporate arm was working on a major deal for Kinross.
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Kinross Gold is an option and it could be preparing for a takeover. It’s been suggested that one reason why Goldman Sachs recently halted research on the company was because its corporate arm was working on a major deal for Kinross.
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