ANGLOGOLD Ashanti on Friday unveiled plans for a $2bn share buy-back following another quarter of record free cash flow.
Announcing its first quarter numbers, the New York listed miner declared a base dividend of $63m, equal to 12.5 US cents per share. This was topped up to 50% of some $1.17bn in free cash flow – a new record – for a total payout of $585m, or 116 US cents per share.
Speaking to analysts at the firm’s presentation, AngloGold CEO Alberto Calderon said even without factoring in the benefits of a buy-back, his company was the best at converting elevated gold prices to dividends and free cash flow per ounce.
“It is the story of the friends and the bear. We are the fastest of the friends. We are the most successful,” he said alluding to a familiar survival allegory.
“The proposed share repurchase programme is intended to offer another vector for shareholder returns, and align the company’s capital return framework with its North American peers,” Calderon said earlier today in notes to the firm’s first quarter results.
Analysts liked AngloGold’s performance and warmed to the buy-back. “We think the market will continue to react favourably to AngloGold’s proactive approach in allocation a significant portion of the current gold price windfall to shareholders – a key point of differentiation vs peers,” said analysts at Johannesburg-based RMB Morgan Stanley.
“We expect a positive market reaction, given the strong cash delivery,” said Arnold van Graan, an analyst for Nedbank Securities. AngloGold was outperforming peers on the JSE, said Tanya Jakusconek, an analyst at Scotiabank.
However, they sought details of how the share buy-back will be managed that Calderon said could not be disclosed until the matter was put before shareholders. “What I can say is that assuming the gold price stays the same there will be more (buy-backs)”.
This implies the shares could be purchased in short order. Gillian Doran, AngloGold CFO added that the group had sufficient financial firepower to complete the programme within a year.
The last 12 months have been remarkable for AngloGold. Its net cash at quarter close of $868m compares to net debt of $755m a year ago. Calderon forecast the company could remain debt-free for the decade.
This was despite growth plans which include a possible 10 to 15% production increase from operating assets over three years. “I am very excited about this,” said Calderon, saying increased production could be achieved from assets as diverse as Ciuabá, Obuasi, Siguri and Sukari. Details would be made available from the third quarter, he said.
AngloGold is also expecting to produce first gold from Nevada at its Arthur project in the early 2030s. A feasibility study in April confirmed average annual gold production of about 500,000 ounces for nine years.
