JOHANNESBURG (miningweekly.com) – Gold mining company AngloGold Ashanti is targeting September as the month in which it will invert its stock exchange listings.

Its primary listing on the Johannesburg Stock Exchange will become a secondary listing, its American Depository Receipt (ADR) listing in New York will be uplifted to become a fully fledged primary listing, and the company's domicile will be the UK to keep tax constant for South African shareholders, who hold 40% of the stock.

Sixty per cent of the stock is held outside of South Africa and two-thirds of its share trading already takes place in New York.

“We intend to make this transition as seamless as possible,” AngloGold Ashanti CEO Alberto Calderon, a former International Monetary Fund luminary, told journalists in a media briefing on May 12 in which Mining Weekly participated.

“Today we announce the proposed redomicile of AngloGold Ashanti. In recent times there has been increased focus on the main drivers of AngloGold Ashanti, starting with the operating model and optimizing of our assets and then moving to strengthen our senior leadership team and refresh our overall organisational culture and values.

“We have made good progress in each of these areas and expect them to continue to bear fruit in the coming months and years.

“In parallel, we have examined the question around the most appropriate corporate structure and determined whether there was latent value to be unlocked. It has been a persisting question from our shareholders, particularly with the disposal of our last substantive operating assets in South Africa.

“After concluding a comprehensive review, we have decided on the following thought process.

‘The first thing is that more than 99% of our people are outside of South Africa, where we no longer have any assets.

“It is also evident, when you look at the current corporate structure, that we are disadvantaged versus our North American peers in several metrics, for example, shares selling at a significant discount.

“Nevertheless, we recognise and value our South African heritage and history. We also respect that 40% of our shareholders are South African today and that still more than 60% of our production is in Africa.

“So, this led to a fit-for-purpose structure where we would be a UK corporate domicile. Importantly, being domiciled in the UK will imply a seamless transition for especially our South African shareholders.

“In addition to this, we will plan to have a US listing on the New York Stock Exchange, which is where our ADRs are today. The very interesting thing is that today, two-thirds of the shares are already negotiated on that stock exchange. So, we’re building up from an historical position which is important, and with this, we will have access to the largest pool of gold capital in the world, that is New York.

“Let me, before finalising, recognise and thank the South African government and the South African regulators for their constructive and understanding approach to this negotiation. I’d like to recognise that historically, we would not have been able to grow and incorporate Ashanti and others without the collaboration and the permission from in particular the SARS and the Reserve Bank of South Africa.

“We intend to make this transition as seamless as possible. The Johannesburg office will remain the same, we’ll have the same board and other things. We’re talking about a cost of around 5% of market capitalisation but that is linked to the share price.

“Finally, we expect to close this transaction around September of this year if we get the support of our shareholders,” said Calderon.

PART OF A SUITE OF OPTIONS FOR SOME TIME

Inverting its stock exchange listings has been part of the suite of options that AngloGold has stated it may pursue to enable the company to have discussions with the government first and the market second.

“I’ve been on the other side. I began my career in government and you don’t want to feel pressured at all, and I can say that they understood that there is a moment when it is time to invest in the country and when there is a time to divest and move elsewhere,” said Calderon.

“Our growth is in North America, the liquidity of gold is in North America, and these are the strategic reasons. This is not about South Africa. I will not comment on internal politics right now. We’ve been at this for a long time.

“We are proud of our heritage, our name and our office and people in Johannesburg. They will continue. Not because we are obliged to, but it is because it is in our interests. That’s where the best mining engineers, mine planners and chartered accountants are in the world, and that’s why we will continue with that office.

“This is about the strategic needs of an international company that was allowed to grow because of the support of the South African regulators,” added Calderon.

EASTERN CAPE OBLIGATIONS CONTINUE

There has been no government condition that AngloGold could not move its domicile so nothing had to be changed or lifted.

“There is zero impact on jobs because of this. I told our employees well before this was rumoured that there would be zero impact. There will be two corporate offices and one of them will always be in Johannesburg and all our obligations relating to the education of the families of our workers in the Eastern Cape and all our liabilities will continue to be funded.

“There are 280 people employed in South Africa and that’s why I say that more than 99% of our people are out of South Africa. All the accounting, the chartered accountants and the human resources and department of communications are here.

“So, it is not in the scheme of things for a company of 30 000 people. It’s small, but it’s relevant. We have obligations that sum up to about $10-million and we have committed in the past to support education of the children of our former mineworkers and we also have rural development programmes that we will continue to pursue in the Eastern Cape.

“This is purely a commercial, legal transaction and changes nothing in the dynamics of all our operations around the world.

“This is a big step. I don’t want to minimise it. I have written an article on why we are doing this and how we considered all the aspects of these moves. In one of the many conversations with the South African authorities, the point was made that there is a time to invest and grow in a country but there is also a time to disinvest because of strategic needs.

“We’re a gold company. We believe there are new gold opportunities elsewhere and that is understood, and that’s why we are grateful to the authorities. It is a big thing for a company of more than 100 years of history to do this and you can understand why at some political levels they wanted some further explanation.

STEADY OPERATIONAL PERFORMANCE

AngloGold reported a steady operational performance for the first quarter of 2023, in line with plans, while confirming annual guidance and delivering on key strategic objectives to improve its valuation compared with its peers.

In Ghana, the company announced a proposed joint venture (JV) between its Iduapriem mine and Gold Fields' neighbouring Tarkwa operation to potentially create Africa's largest gold mine. Excluding the interest to be held by the government of Ghana, AngloGold will hold a 33.3% interest. The proposed JV is expected to deliver extended life, increased production and improved costs. Estimated average yearly production is expected to be almost 900 koz over the first five years at an all-in sustaining cost (AISC) per ounce of less than $1 000/oz.

"We're taking pragmatic, commercially sensible steps to unlock value," said Calderon.

"Operationally, the year has started as expected, with normal seasonal improvements to come in each of the remaining quarters as we work to meet our overall objectives for the year."

AngloGold, under its new leadership team, is taking steps to narrow a value differential with its international peers.

It has targeted safety improvements, is working to improve costs and increase the life of its key mines, while enhancing cash conversion and prioritising delivery of major projects.

The company's total recordable injury frequency rate improved to 0.88 injuries per million hours worked during the first quarter of 2023, its best performance ever and well below industry peers.

Production was consistent year-on-year at 584 000 oz for the first quarter of 2023, with strong performances from the Obuasi and Iduapriem mines offset by lower production from Kibali, Siguiri and the Brazilian operations.

The Obuasi gold mine in Ghana continued its planned ramp-up during the first quarter of 2023, with a 58% year-on-year jump in production and a drop in AISC as tonnages and grade increased. The Obuasi site also reported 3.5-million shifts with no lost time injury.

In Brazil, the Cuiaba mine complex successfully transitioned to producing gold from its gravity circuit and gold concentrate in line with expectations. Normal production levels were lower during the first quarter of 2023 compared with the same period last year, mainly owing to the suspension of tailings deposition at the Calcinados tailings storage facility (TSF) and processing of gold concentrate at the Queiroz plant, which services the Cuiaba mine complex, until completion of a buttressing programme at the Calcinados TSF. When Cuiaba is excluded, group production rose 2% in the first quarter of 2023 compared with the first quarter of 2022.

Total cash costs per ounce increased by 16% to $1 204/oz in the first quarter of 2023 compared to $1 041/oz in the same period last year, mainly owing to continued inflation and input price increases which peaked in the second and third quarters of 2022, lower grades at Kibali, and higher waste stripping costs at Tropicana in line with expectations, lower by-product revenue and volumes in Brazil, and higher royalties paid owing to higher revenues. This increase was partly offset by weaker exchange rates against the US dollar and favourable inventory movements.

AISC increased by 15% to $1 619/oz in the first quarter of 2023 compared to $1 405/oz for the same period last year, mainly owing to higher total cash costs and a planned increase in sustaining capital expenditure (capex).

The company anticipates costs to come down over the course of the year as inflation and input prices are expected to continue to recede and the company expects to continue to deliver on its full asset potential programme.

The balance sheet remained robust following the payout of the final 2022 dividend, with liquidity of approximately $2.3-billionn, including cash and cash equivalents of $0.8-billion, at the end of March 2023.

PRODUCTION

Production for the three months ended 31 March 2023 was 584 000 oz, at a total cash cost of $1 204/oz, compared with 588 000 oz at a total cash cost of $1 041/oz for the first quarter of 2022. Production was steady year-on-year as AngloGold Ashanti continued to progress reinvestment in key assets to improve operating flexibility and extend mine lives, while also advancing a programme to buttress the TSF which services the Queiroz plant at the Cuiaba mine complex in Brazil.

Strong operating performances were reported from Obuasi and Iduapriem, which posted production gains and AISC improvements, while steady contributions were made by Cerro Vanguardia in Argentina, Sunrise Dam and Tropicana in Australia and Geita in Tanzania.

In response to Mining Weekly on the problems of the company in Argentina, Calderon said: “In Argentina, the issue is the taking out of capital but it’s just the exchange rate. We haven’t solved everything. The situation is probably a bit better but at some point they need to devalue and we would hope to have access to the funds.”

Applications have been made to the Argentinean central bank to approve the purchase of US dollars in order to distribute offshore dividends related to the 2019, 2020 and 2021 financial years of $90-million.

Under a special regime established for dividend payments, a petition to distribute a portion of the offshore dividends applied for, in the amount of $54-million, was submitted to the Argentinean central bank during the third quarter of last year. In December last year, the Argentinean central bank approved the payment of $18-million to AngloGold, representing only a portion of the amount applied for, based on the applications submitted under this special regime. While the remaining approvals are pending, the cash remains available for Cerro Vanguardia's operational and exploration requirements.

During the first quarter of 2023, Cuiaba produced 41 000 oz, which comprised 16 000 oz of gravimetric gold and 25 000 oz of gold-in-concentrate. At Geita, production was in line with the mine plan, as the operation successfully concluded scheduled mill maintenance and the planned replacement of the girth gear during the first quarter of 2023. Geita is expected to achieve production of about 500 000 oz for 2023, with strong gains to come over the balance of the year. At Kibali, in the Democratic Republic of Congo (DRC), production was lower year-on-year mainly owing to lower underground grades as a result of mine sequencing.

COST INCREASES

Total cash costs per ounce for the first quarter of 2023 were $1 204/oz, compared to $1 041/oz for the first quarter of 2022.

The increase in total cash cost per ounce was mainly owing to continued inflation and input price increases which peaked in the second and third quarters of 2022, lower grades at Kibali and higher waste stripping costs at Tropicana in line with expectations, lower by-product revenue and volumes in Brazil, and higher royalties paid owing to higher revenues. The increase was partly offset by weaker exchange rates against the US dollar and favourable inventory movements.

AISC for the first quarter of 2023 were $1 619/oz, compared to $1 405/oz for the first quarter of 2022, mainly on higher total cash costs and a planned increase in sustaining capex.

Lower cash costs are anticipated in the second half of the year in line with guidance as it continues to deliver on its full asset potential programme and the miner expects inflation and input prices to continue to recede.

EARNINGS DOWN

Adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) for the first quarter of 2023 were $320-million, compared with $438-million for the first quarter of 2022. Ebitda was lower year-on-year mainly owing to lower gold sales and higher operating costs, partly offset by the marginally higher gold price received.

GOLD HEDGES

During the first quarter of 2023, zero-cost collars were entered into for a total of 136 000 oz of gold for the period February to December to manage gold price downside risk associated with Cuiaba partly transitioning to gold concentrate sales and the current high cost associated with Corrego do Sitio. During the first quarter of 2023, a realised gain of $1-million was recorded. At March 31, the mark-to-market value of the remaining open positions was an unrealised loss of $4-million.

OIL HEDGES

During July last year, forward contracts for a total of 999 000 bbl of Brent crude oil were entered into for the period January to December this year for cash settlement on a monthly basis against the contract price. This comprises 40% of total anticipated 2023 consumption. The average price achieved on the forward contracts is $89.20 per barrel of Brent crude oil. During the first quarter of 2023, a realised loss of $2-million was recorded. At the end of March, mark-to-market value of the remaining open positions was an unrealised loss of $2-million compared with $6-million last year.

NET CASH FLOW DOWN

First-quarter net cash inflow from operating activities decreased to $94-million, compared with $533-million for the first quarter of last year.

First-quarter free cash outflow of $161-million was recorded for the first quarter of 2023, compared with $268-million for the first quarter of 2022, adversely impacted by higher planned capex and unfavourable movements in working capital, factors partly offset by lower taxes paid.

Cash remittances from the DRC continued to flow as expected. First-quarter cash distributions of $37-million were received from the Kibali JV, compared with $326-million for the corresponding period of last year. Continued lock-ups of value added tax at Geita and Kibali and foreign exchange restrictions and export duties at Cerro Vanguardia impacted free cash flow.