image001The shares of gold major AngloGold Ashanti rose more than 5% in less than an hour?on Monday?after the company announced the withdrawal of its five-day-old proposal to demerge 35% of its international assets and raise $2.1-billion in equity capital and was considering partnering to unlock value from its large Colombian resource base.

?The extent of the capital ask right now is a price nobody is prepared to pay to unlock the restructure,? CEO?Srinivasan Venkatakrishnan?(Venkat) told journalists in a hastily arranged media conference call to announce the rapid ditching of its unpalatable capital raising plan.

The withdrawal sent the share of the JSE- and NYSE-listed stock on an upward trend that was continual in Johannesburg until trading closed. To replace it, Venkat said that work on group optionality would continue at a time of rising production, falling costs and opportunities to extract value from Colombia in particular.

The new reef-boring technology would be ratcheted up still further in South Africa, following the completion of 30 additional holes drilled in a single quarter using the technique that safely mines all the gold, only the gold, all the time, using a mechanical method that dispenses with drilling and blasting. Shareholders could expect to see cash begin to flow from deleveraged assets in general and its large Colombian resource base in particular.

?Colombia is certainly in ?elephant? territory and we want to use the next 12 months to crystallise some value from it,? Venkat said, adding that there was potential to double the current 50-million-ounce level at its next Colombian resource announcement. Partnership would enable the company to reduce its ongoing cash investment in its Colombian developments, which were too big for any one gold company. ?Colombia naturally lends itself to a good partnership and value-enhancing opportunities,? he added.

While debt was higher than the company liked in the current environment of low gold price and high interest charges, there was sufficient financial headroom to allow all options to be reviewed. ?We?ve got time to look at all options to pull down our debt level and certainly an asset sale would be one such possibility,? Venkat said.

The restructuring would have kept the South African assets in AngloGold Ashanti and housed the international assets in a 65%-owned London-listed entity, but engagement with nearly two-thirds of the shareholder base has stopped the proposal from going ahead. ?There has been broad support for the strategic logic of the restructuring, but a number of shareholders have expressed concerns about certain aspects of the proposed transactions, in particular the quantum of the equity capital raising,? the company said in a media release.

AngloGold Ashanti had, therefore, decided not to proceed with the restructuring and capital raising as currently proposed but would continue to evaluate all options to address debt levels and unlock value, taking into account the feedback from its shareholders and its business needs.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.