THE last nine months at AngloGold Ashanti have been curious. First came the resignation of its CEO, Kelvin Dushisky, barely two years into the job. Then, about four months later, the firm’s chairman, Sipho Pityana, quit.
Former Absa CEO, Maria Ramos, appointed to AngloGold’s board in 2019, took over its running, but no permanent replacement was found on the executive side of the business for Dushnisky whose departure had been pockmarked by speculation of tension between the board and South Africa’s state-owned Public Investment Corporation (PIC).
Dushnisky had repaid an $800,000 bonus for joining AngloGold after it was recognised he’d earned a bonus of $926,160 on leaving his former employer, Barrick Gold. AngloGold denied Dushnisky’s departure and the bonus confusion were connected, saying the matter was a mix-up that had been corrected.
In the period between the departures of the CEO and chairman, AngloGold took no steps to find a replacement CEO. According to Chris Griffith, appointed CEO of AngloGold Ashanti’s rival, Gold Fields in January, he hadn’t applied for the AngloGold job because the company hadn’t arranged any interviews. This was despite Gold Fields’ then CEO, Nick Holland, announcing his resignation around the same time as Dushniksy.
What’s odd about this apparent tumult among senior staff – and board dysfunction – is that it comes amid many other signs that AngloGold Ashanti is a company on the crest of a wave, at least operationally. This is owing to the high gold price, and the somewhat unappreciated fact that structurally, AngloGold Ashanti is in pretty good shape.
It’s in this context that Christine Ramon, who until August was the group’s CFO of just over six years, was appointed its interim CEO. Disconcertingly, perhaps, for her, the board is yet to make a full-time appointment. However, in an interview with Miningmx in February, Ramon said the company’s board was “seized” with the matter of the CEO succession.
“Right now, it is a board matter which realises the urgency. The process is well advanced though,” she said. Ramon is thought to want the job and, as the last few months have demonstrated, is well suited despite some murmurs in the investment community that a person with mining and technical experience would be a better fit.
Says Ramon: “We have met our production guidance, we have streamlined the portfolio and we are financially strong.” At $600m as of December 31, net debt is at its strongest level in a decade. “I joined the company when net debt was at its height,” says Ramon.
In 2014, gross debt totalled $3.5bn whilst the ratio investment managers frequently apply to test the company’s ability to service debt – net debt to earnings before interest, tax, depreciation, and amortisation (EBITDA) – was 2.1x.
What followed was an improvement in cost consciousness and a rethink in strategic direction which Dushnisky continued from 2018 by deciding to exit the firm’s last South African assets: Moab Khotsong and Mponeng for a combined $600m, both to Harmony Gold. The company would keep its Johannesburg headquarters but it would seek a listing offshore, possibly in London.
Dushnisky’s departure, however, created a perception AngloGold was without a strategy. This is despite delivering record year-end earnings, a doubling in the dividend payout, and it having signed a new corporate bond at its lowest ever interest rate. For all this, however, AngloGold is certainly without a full-time leader. In a gold market obsessed with finding the next resource ounce following a decade of under investment in exploration and development, the company has become vulnerable to takeover.
Its position wasn’t helped by the relatively poor performance of its share price, especially against the likes of Gold Fields shares in which were 85% higher in 2020. In comparison, shares in AngloGold were only 7.7% higher. The fact was not lost on Mark Bristow, the South African-born CEO of Barrick Gold.
He told Miningmx in an interview in January that AngloGold looked a tasty merger and acquisition option, largely for its 40% share in Kibali, the extremely rich gold mine in the Democratic Republic of Congo which the two companies share in joint venture.
“From a technical perspective, the best assets to prioritise are those you hold in joint venture,” said Bristow. But he added: “At the same time, running a process in South Africa … I’m not sure that is appropriate strategy”. Bristow subsequently said Barrick was cooling its heels; mergers and acquisitions would have to be paused until the company had more price visibility on the gold price, which has been volatile.
“I can’t comment on what Mark has said,” responded Ramon. “We are partners with Barrick in Kibali, and we work well with them. We are focused on executing a strategy and we have continuity in that regard.”
It’s important that Ramon pushes the notion that AngloGold’s strategy hasn’t changed. In the noise created by senior management and board departures, AngloGold’s purpose in life has become obscured. The proposed UK listing, for instance, was seen as the natural consequence of Dushnisky’s strategy of having dispensed with the last of its South African assets.
“Kelvin was clear that we needed to deliver the South African asset sales, but it was never a package,” says Ramon of the UK listing. “It [the listing] remains on the horizon. I don’t believe it’s off the radar at all.”
Strategy was also on Ramon’s mind when, a day after the firm’s annual results presentation, it updated analysts and media on AngloGold’s intent and direction. It announced that increases in resources and reserves, as well as organic growth options, were among AngloGold’s top priority as if to prove to the market the company isn’t trapped in amber.
For instance, some 6.1 million gold reserves were added in 2020 for a total of 30 million oz, equivalent to 12 years life in the Americas, 12 years in Continental Africa (non-South African), and five years in Australia.
Dominic O’Kane, an analyst at JP Morgan Cazenove, said the presentation “… moves AngloGold out of a period of ‘strategic limbo'” with its focus on “… revitalising the existing asset base”. These include commitments to build the company’s new fleet of mines, starting in Colombia, and continuing the redevelopment of the Obuasi gold mine in Ghana. Estimations are that capital spending could top $1bn annually until about 2025.
During this period, production would be increased to about 3.4 million ounces of gold a year from 2020’s two million oz. This is assuming the 67,000 oz/year Quebradona and 284,000 oz Gramalote mines in Colombia receive investment approval this year.
As for merger and acquisition activity of its own, Ramon is doubtful. Valuations in the gold market have been on the rise for the past two years, deterring most of the asset hunters, bar one or two outliers.
“It’s not a focus for us right now,” says Ramon. “We of course remain alive to such things, but to be honest – we’ve got our hands quite full.”