Investors take a shine to AngloGold

[] — ANGLOGOLD Ashanti shares on Thursday traded at levels last seen in early 2009 – an indication that investor sentiment for South Africa’s big gold miners may begin to catch up with the current record-breaking gold rally.

The group’s shares traded at around R362.80 at 15:40 on Thursday, up 3.7% for the day after reaching an earlier high of R366.31.

Apart from Tuesday when the group’s stocks closed at R350.10, it has not traded higher than the R350 level since March 2009, moving in a band of between R265 and R350 per share.

Gold was trading at $1,408 per ounce late on Thursday afternoon, up 0.79% for the day.

Imara SP Reid gold analyst Percy Takunda said the market might have placed too big an emphasis on AngloGold’s exposure to the strengthening rand and South African-related cost pressures, pointing to the fact that less than 35% of the group’s output is derived from South Africa.

“The rise today (Thursday) could be reflective of a correction,’ said Takunda. “We believe too much emphasis had (earlier) been placed on the group’s South African exposure.’

During a results presentation for the period to end-September earlier on Thursday, JP Morgan analyst Steven Shepard praised AngloGold management for “an outstanding quarter’.

“The figures are outstanding on the cost front (and) the production front, and the exploration platform looks exciting,’ he said.

AngloGold posted adjusted headline earnings of R2.1bn for the period under review – up 122% from R980m in the July quarter. Although the adjusted headline earnings excluded about R11bn associated with the closure of the group’s hedge book, with another approximately R8bn to be accounted for in the final quarter of the year, investors should begin to see the advantages of the group’s full exposure to the gold price from 2011.

In October, the company completed the buy-back of its outstanding hedge positions at a cost of $2.64bn and an average price of $1,300/oz.

AngloGold said the removal of the hedge book lets the company sell its gold at market prices, allowing it to better fund the pipeline of organic growth projects expected to add about 1 million oz to current production over the next five years.

“The removal of the hedge book may have been expensive, but it was long overdue,’ said Takunda. “Investors should begin to see the benefits of it from 2011.’


AngloGold CEO Mark Cutifani said the group is budgeting on gold to remain between $1,300/oz and $1,400/oz for the next 12 months.

In a review of the gold market, the group said the surge in the value of global exchange-traded fund holdings was notable, with a 40% increase in value for the year to date.

“China has shown further positive growth in investment demand and leading bullion houses reported a steady uptick in gold bar sales,’ the group said.

The same holds true for India, where gold imports during July and August almost doubled to 157 tonnes from 88t recorded for the same period in 2009.