AngloGold Ashanti doubles payout rate as third quarter cash floods into coffers

ANGLOGOLD Ashanti doubled the dividend which it will now pay semi-annually following a third quarter of strong cash flow.

It will now pay 20% of free cash flow before capital expenditure following a third quarter in which year-on-year cash generation for the period increased $252m to $339m.

This cash inflow excluded $200m from the sale of its Mponeng and Mine Waste Solutions businesses to Harmony Gold, sealed in September. The third quarter cash doesn’t include AngloGold’s $359m share of cash locked up in the Democratic Republic of Congo (DRC).

AngloGold Ashanti and its partner, Barrick Gold have an equal stake in Kibali, a gold mine in the DRC the government of which has delayed the distribution of subsidiary profits. The amount owed to AngloGold increased $66m in the quarter.

Net debt halved year-on-year to $875m.

This took the firm’s debt to profits – measured as adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) to net debt to its lowest level in a decade of 0.36x. The firm said it was committed to a ratio of 1x through the cycle.

The company, which is in search of a new permanent CEO following the surprise August resignation of Kelvin Dushnisky, also reinstated guidance in September. Including the contribution to date of the operations sold to Harmony, production for 2020 will be 3.03 to 3.1 million ounces at an all-in sustaining cost (AISC) of $1,050 to $1,100/oz.

For the quarter, production came in at some 837,000 oz – 11% higher – at an AISC of $1,044/oz (Q2: 825,000 oz at $1,031/oz).

The gold price was the main factor behind the third quarter performance. Adjusted EBITDA increased to $803m from $468m in the second quarter. The price received in the period was $1,904/oz from a previous price of $1,464/oz.

Commenting in a media conference following publication of the third quarter numbers, Christine Ramon, interim CEO of AngloGold, acknowledged the company had “lagged our peers” in terms of improving dividends.

“We have been very focused on investing in our own resources, but we think the revised policy is now sustainable through the cycle,” she said.

The dividend adjustment could lead to a rerating of the share, according to the title of a note issued by Standard Bank Group Securities analyst, Adrian Hammond, today. “Management has enhanced the dividend policy which was long overdue and likely contributed to the significant discount on the stock,” he added in the note.

Shares in the company were about 5.5% higher on the Johannesburg Stock Exchange but have unperformed their peer group for most of the year.

The company wasn’t planning a special dividend, however, should the the cash locked up in the DRC be eventually released. “We think the adjusted policy will deal with that.”

Asked if she was interested in applying for the CEO position, Ramon said: “At the moment I have got my hands quite full.” The board had not set a drop dead deadline on an appointment, she added.

Plans by AngloGold to list in either London or New York were no longer a priority whilst not abandoned either, she said.

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