AngloGold Ashanti plots its exit from SA

JOHANNESBURG – AngloGold Ashanti on Thursday announced plans to sell all its remaining South African mine Mponeng, the world’s deepest mine outside Carletonville, as the company exits from the country. 

The sale would mark the end of a century of gold mining by AngloGold Ashanti in South Africa and underscore that rising input costs have blighted the domestic gold industry.

Kelvin Dushnisky, the Joburg-headquartered group’s chief executive, said Mponeng was ramping up production, which was expected to give it a lifespan of about eight years and it required additional capital investment to further extend its life.

“The investment to extend Mponeng’s life beyond eight years has very strong competition for capital and other scarce resources from a host of other projects in our portfolio, which at current planning assumptions are more attractive, generating higher returns and quicker payback periods.

"We have, therefore, decided to review divestment options for our South African business,” Dushnisky said.

AngloGold, which employs 6 000 workers at its South African mines, said it was exploring the sale of all its local operations. This comes two years after it embarked on a restructuring process that changed the local business profile. The company also retrenched 2 000 of its workforce last year as part of the exercise.

Dushnisky told journalists yesterday that the group was searching for a company to take over the remaining mines. “This process is at an early stage and may not ultimately result in any change to the ownership of the South African business,” he said.

“We have to wait to see who surfaces as potential bidders,” he said adding that he was not in a position to divulge how much the company would raise from the sales.

Proceeds from the sale are expected to be used to pay off debt, boost the balance sheet and also add value for shareholders.

AngloGold is valued at R70billion and is part of the FTSE/JSE Top 40 index. Dushnisky said the company would remain listed on the JSE.

“AngloGold is an iconic South African company. We’ll always have a JSE listing and this is not up for consideration,” he said, adding that the company would consider a secondary listing elsewhere. 

AngloGold drastically downscaled its South African portfolio in 2017 when it sold the Moab Khotsong Mine to Harmony Gold and the Kopanang Mine to Hong Kong’s Heaven Sent company.

Other than Mponeng, AngloGold owns Mine Waste Solutions, a mine waste retreatment operation and a surface rock dump processing business in South Africa.

Rene Hochreiter, an analyst at Noah Capital, said while the gold price had gained ground since last year, the rising costs of gold production was problematic.

“Profitability is the underlying issue. Costs keep rising in deep-level underground gold mines. The costs in South African gold mines increase 10 percent every year, they are the highest in the world,” he said.

Hochreiter also said the decision to sell South African assets came as no surprise and the market was very aware of it.

“There may be some uninformed that didn’t know, but generally, everyone knew as AngloGold indicated this at their last presentation results in February this year,” added Hochreiter.

Trade Union Solidarity also said the sale of Mponeng and other assets was expected.

However, Solidarity general secretary Gideon du Plessis said the union was disappointed that the company had identified better growth opportunities outside South Africa.

“This announcement does not only prejudice job security, but would cause major uncertainty among employees, directly impacting employee morale,” Du Plessis said.

AngloGold shares closed 1.44 percent lower at R168.74 on the JSE on Thursday.

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