ANGLOGOLD Ashanti smashed records on several fronts on Friday, announcing a $1.8bn total payout and unveiling details of a project study its CEO described as one of the world’s best gold discoveries in decades.
The total payout represents 62% of $2.9bn free cash generated by the company in the 12 months to December and includes a fourth quarter $860m interim dividend. Free cash flow in the last three months of the year was $1bn when the gold price averaged $4,171/oz.
Amid a $5,000/oz plus gold price currently, AngloGold’s 66-year old boss Alberto Calderon told analysts in a presentation: “The best is yet to come”.
A year ago AngloGold unveiled a new dividend policy targeting 50% of free cash flow and a base dividend of 50 US cents per share. The intention behind the base dividend was that during financial years of no free cash flow, a minimum $250m in dividends was guaranteed. Such guarantees are superfluous in the current market.
“In the end, this is more symbolic,” said Calderon of the payout. “This is just an indication of how we think about things, but I don’t want to get ahead of myself. We don’t know where the gold price is going to be,” he said.
AngloGold also disclosed details of Arthur, a prospect in Nevada, which will average 550,000 ounces a year in production once built. The project is scoped to exploit a current reserve of 4.9 million oz after a $3.6bn build programme.
Calderon stressed the project was not yet permitted and first had to undergo a definitive feasibility study, expected to take the best part of a year to complete. But he said Arthur was among the best gold discoveries, certainly in the US, in decades.
“We don’t have exact timelines at the moment, but what I can tell you is that we want to have the project in construction before the end of this decade, with production commencing at the beginning of the next decade,” Calderon said. In its second or third year of production it would supply 800,000 oz to the market and will add reserves incrementally. “We do expect to add between one and 1.4 million ounces in 2026,” he added.
The project is expected to produce gold at an all-in sustaining cost of $954/oz in real terms over a nine year life of mine.
“It is likely to add many millions of ounces of reserves as drilling progresses. The orebody is simple to mine, its metallurgy is simple and its geology is fairly simple,” said René Hochreiter, an analyst for Noah Capital.
Permitting of mining projects can take as much as three to four years. Asked to comment on the process for Arthur, Calderon said that while there was “tremendous support” from the federal and state governments he declined to give specific timelines. “There are so many things outside our control,” he said.
“While the Arthur PFS (prefeasibility) does not detract meaningfully from near-term cash generation, its Tier 1 nature has the potential to help drive a further re-rating over the medium-term,” said UBS in a note on Friday.
