ANGLOGOLD Ashanti CEO Alberto Calderon said on Friday a long-standing discount between his firm’s valuation and North American peers had finally been removed and pledged more progress amid a sky-high gold price.
“We go on,” Calderon said at the firm’s second quarter results announcement in which a record quarterly dividend was declared.
AngloGold said it would pay a $406m second quarter dividend, equal to 80 US cents per share after posting a one-fifth year-on-year increase in second quarter gold production. It received a near 50% higher gold price, an increase of around $1,000/oz.
The outcome was a 149% increase in free cash flow for the second quarter of $535m. Adjusted net debt was reduced to $92m, some 92% year-on-year.
The payout comprises a minimum payout of $63m (12.5c/share) but also includes the early payment of 50% of free cash for the six months ended June. This is in terms of AngloGold’s upgraded dividend policy announced earlier this year.
AngloGold elected to expedite the ‘true-up’ from free cash “given the strength of cash flows and its confidence in the outlook”.
Shares in AngloGold gained 5.5% taking year-to-date gains to 94%.
Commenting on the firm’s valuation, Calderon said: “For as long as this company has been in existence, we’ve struggled with the disconnect between our production size and relative size to our North American peers.
“We know that this isn’t the result of a single thing, but rather the cumulative effect of a number of factors. We’ve gone about systematically addressing these issues over the past three years,” he said.
In that time cash costs and all-in sustaining costs have risen by just under 2% in real terms versus a 15% increase in the peer group’s average.
As a result the gap “has already closed with probably the largest of the peers,” said Calderon. “I think it has closed in some of them 100%; in others, two-thirds. So at this stage, I think that is not an issue anymore.”
Asked if the company would consider buybacks, as alluded to by Calderon in the firm’s first quarter presentation, he said: “We’ve said already that we will again contemplate options of buybacks or paying down debt at the end of the year. But we’ll analyse that when the time comes. Right now, we’re happy to be able to provide this massive dividend, and at the end of the year, we’ll see where we land.”
