SA gold firms unmoved by in-favour UK market, despite Govt.’s failure to block AngloGold

THE sale of AngloGold Ashanti’s South African assets to Harmony Gold was approved unconditionally last week – a development that potentially frees AngloGold to consider a primary listing, either in New York or London, as previously mooted.

Yet there’s no appetite for the switch right now, as explained by former CEO, Kelvin Dushnisky. Speaking in August at the firm’s interim numbers presentation, Dushnisky said that a listing “… certainly is there as an option”, but that “… the focus of the board and the company in general is navigating the pandemic and its aftermath”.

There are other reasons to consider the timing to be wrong. In order to maximise the benefits of London’s deep capital market, AngloGold first needs to improve its cash conversion by having the Congolese government approve VAT repayments, as well as potentially adopt a more generous cash return, if not a more aggressive dividend policy.

SA Govt Gambit

AngloGold raised the prospect of moving its primary listing as early as 2018. Those plans, however, were thrown into disarray by the South African government which said it would not approve of the $300m sale of local assets to Harmony unless AngloGold agreed to keep its local primary listing.

Section 11 of the Minerals and Petroleum Resources Development Act (MPRDA) can’t prescribe such conditions, however. Among other aims, the legislation is primarily pointed towards the fitness of the transferee when there is a change of ownership. The failure of that gambit brings an end to another sorry misstep by the government, its critics say.

“AngloGold Ashanti should have every right to position itself in the best possible way for its shareholders, but they get blocked,” said Neal Froneman, CEO of Sibanye-Stillwater in a recent interview.

It was one of the many negative messages about South Africa that is communicated to investors, Froneman said. “It makes it incredibly difficult for South African companies to achieve the right rating.”

New listings in London are on the increase following secondary listing of North American shares Yamana Gold and, today, Wheaton Minerals, the metals streaming company. The attraction London offers (especially to Johannesburg companies) is the extent of generalist fund interest that can be generated through tracker funds.

The listing has to be primary, however, as tracker funds are not mandated to follow a secondary listing; currently, other South African companies are not interested in taking that route. “It’s something that we aspire to somewhere in the future, but I don’t believe that doing it before you have a portfolio of assets where the majority are in the appropriate jurisdiction,” said Froneman. “It would make no sense for us.”

Sven Lunsche, spokesman for Gold Fields, said his company had no plans to consider changing the primary listing from Johannesburg. The firm “has its following” in North America, he said.

The only company to have undertaken a new listing is Pan African Resources which opened an ADR account in New York. This was in order to capitalise on investors seeking new exposure to the gold market.

Specialist investors may view Pan African with some interest, at least in the current market of elevated gold prices, said Michael Siperco, an analyst for Velocity Trade Capital.

“There is a notable lack of junior producers in the +/-100koz a year range and with a few recent transactions, there’s less pure exposure available to African production than there has been recently,” he said.