[miningmx.com] — Moody’s Investors Service on Wednesday said it expected that the elimination of the discount to spot prices that has historically impacted AngloGold Ashanti’s received gold prices will help boost the group’s future operating profitability and cash flow generation.
It said the elimination of AngloGold Ashanti’s hedge position would also underpin the company’s credit ratios, even though the magnitude of the uplift will ultimately depend on whether the current strength in gold price is sustained in coming years.
Moody’s has confirmed the Baa3 senior unsecured ratings of AngloGold Ashanti plc and the guaranteed debt obligations of its subsidiary AngloGold Ashanti Holdings plc following shareholder approval of the share settlement of the recently-issued mandatory convertible subordinated bonds and confirmation that the automatic cash settlement no longer applies.
The outlook for the ratings is stable.
Moody’s said the rating action concludes the review for possible downgrade of AngloGold Ashanti’s ratings that Moody’s initiated in September 2010 in response to the announcement by the company of its intention to effectively eliminate its gold hedging position and pending shareholder conversion approval.
“Moody’s believes that the conservative funding of the transaction completed by AngloGold Ashanti in early October to eliminate its gold hedge book, which included a significant $1.6bn component of equity, largely mitigates the near-term effect on its credit metrics of the incremental debt taken on to meet the cost of closing out all future hedge contracts,” the ratings service said.
“This also helps preserve the group’s financial flexibility and support its liquidity position as evidenced by a relatively limited utilisation of its main credit facility,” it added.
Moody’s said in the intermediate term, the positive effect on the financial performance of AngloGold Ashanti that should accrue from taking advantage of full exposure to spot gold prices close to current market levels in parallel with the successful execution of its Project ONE initiatives, could lead to upward pressures developing on the Baa3 rating.
