AngloGold passes on A$903m Tropicana option in favour of self-funding growth projects

Tropicana Gold Mine site.

ANGLOGOLD Ashanti kept its powder dry for greenfield projects in Colombia by passing up its pre-emptive rights over a 30% stake in the Tropicana mine in Australia that came up for purchase last year.

The Johannesburg-headquartered gold producer said in an announcement today that it would waive its pre-emptive rights to the 300,000 ounce a year mine enabling Regis Resources, an Australian miner, to take up the stake for A$903m (R9.9bn). Regis is buying the shares in Tropicana from current holder, IGO Ltd.

“We’re pleased to start our long-term relationship with Regis, which recognises the value that we see at Tropicana,” said Christine Ramon, interim CEO of Anglogold Ashanti. “With the sale process behind us, we are looking forward to working with Regis to deliver Tropicana’s potential over the coming years,” she said.

AngloGold Ashanti described Tropicana as “a key asset” in its portfolio. The mine has a 7.64 million oz of gold mineral resource and ore reserves of 2.7 million oz.

Ramon said in February that AngloGold Ashanti intended to grow annual production to between 3.2 million ounces and 3.6 million oz by 2025. Production for 2020 totalled 3.05 million oz.

Production growth would come mainly from the ramp-up of its Obuasi mine in Ghana and incremental improvements elsewhere in the portfolio. There were also plans to approve the development of greenfield gold prospects in Colombia which it holds in joint venture with B2Gold, a Toronto-listed gold miner.

Last year, the Company added 6.1 million ounces of gold on a gross basis, further extending the life of its portfolio. At Obuasi in Ghana, it added 1.8 million oz in new reserves whilst at Geita in Tanzania, reserves were increased by 1.4 million oz. This more than replaced depletion from mining and extended the overall reserve life of AngloGold’s portfolio to 11 years.

Said Ramon in February: “After several years of rationalising our portfolio, we have a clear and credible path to disciplined, high-return growth”. She added the company would self-fund its capital investment whilst continuing to pay a dividend.

Headline earnings for the 12 months ended December came in at $1bn, equal to 238 US cents per share which compares to $379m (91 US cents/share) in 2019. The group consequently declared a full year dividend of 48c/share compared to 9c/share last year. In rand terms the full-year dividend was 705c/share (2019: 165c/share).

AngloGold pays out 20% of free cash flow before growth expenditure, a rate it doubled last year. Free cash flow increased to just over $1bn in the 2020 financial year.

1 COMMENT

  1. Anglogold is currently better managed than at any time since its formation in 1997.
    This decision to not pre-empt is a victory for rationality, in the same way that the sale of the SA assets was.
    But the flipside of the coin is that they need to use the high gold price to exit from their low quality assets.
    Obuasi and some of the sub-scale South American mines are structurally unattractive assets that are only viable at a high gold price.
    The Capital Markets Day was hugely impressive and reflected a culture of being open for business.
    Let’s see if the Board has the courage to keep taking the difficult, but right decisions.

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