Johannesburg - AngloGold Ashanti is finished with the large-ticket sales of assets and has just a few small ones left as it is massaged into shape to become a much more profitable business, said CEO Mark Cutifani.
AngloGold has agreed with Newmont, its partner at the Boddington mine in Australia, to sell its one-third stake to the North American miner for $1.1bn, of which $750m will be cash, $240m in cash and possibly Newmont shares, and a royalty capped at $100m.
AngloGold has completed six major transactions in excess of $1bn over the past 15 months since Cutifani took over the company and whipped it into shape, cutting out the worst of a large hedge book, exiting non-core assets and extracting better value from mines remaining in the group.
"That's an average of a big transaction every quarter and it gives you a sense of how much change we're driving and how much re-structuring we've been doing in the core business," Cutifani told Miningmx.
"By the end of 2009 we will be in fighting shape and we will rebuild and grow the business off a very sound financial base so that we start nailing those (double-digit) returns on a long-term basis."
AngloGold when Cutifani took over the reins from Bobby Godsell had a return on its portfolio of five to six percent.
In the transaction with Newmont, AngloGold is effectively benefiting by $1.3bn, if the capital the company was to spend at Boddington this year is taken into account.
"It will release that back into the business so that we can continue to invest in some of the attractive high-return opportunities that we have so we can deliver on the target of double-digit returns on capital employed," Cutifani told Miningmx.
"We set a target of 2010/2011 (for double-digit returns), but we might give that a shake this year. I'm not saying that's a forecast, but we might just give it a shake," he said.
AngloGold has largely completed its strategy of divesting of assets, with just a few smaller sales still to go, he said.
"It's unlikely we'll see big asset sales unless someone comes in with big bags of money," he said.
"We said we wanted to nail a big asset at a billion dollars. We've done it. That's the last tick in the box on all the strategy elements. We are not out there marketing another big asset, but if there's value you never say no.
"[The mines in] Mali and Tau Lekoa we leave on the table. They're small assets and non core, but we won't sell them unless people are prepared to pay for their value," he said.
AngloGold has received bids on the Tau Lekoa mine and tailings dumps in South Africa, but Cutifani declined any further comment.
"We are evaluating those bids. Everyone's finding finance tough and there's no guarantee we will part with the assets given the market we're in," he said.
Geita progress slow
AngloGold releases its December quarter results on 9 February and Cutifani said they would be "strong".
"There are a couple of things we haven't got on top of and we still need to do a lot of work. At Geita for example the progress is slow and in some cases not as positive as we'd like it to be," he said, adding there were still six months of hard work ahead.
The perennially disappointing deep-level Obuasi mine in Ghana was showing more signs of progress after a "solid" performance of 90 000 oz in the third quarter. Similar production was expected in the fourth quarter.
He declined to give much detail because AngloGold is in a closed period ahead of releasing its results next month.
The reason for selling Boddington is the fact that AngloGold was a junior partner with no management control and it was highly unlikely that Newmont would sell down its stake in the million oz/year gold mine, he said.
The sale was widely applauded by the investment community because of the high value AngloGold realised for its stake.
AngloGold is going to apply the funds to its debt. Cripple Creek in the United States, Sao Bento in Brazil, Sunrise Dam underground development and Tropicana in Australia as well as African projects, including doubling the size of Navachab in Namibia, are the projects AngloGold has its focus on.
"The market generally is tough. Small companies are battling find finance and they're being discounted by the market. We think that creates an environment where there are some M&A (merger and acquisition) opportunities for us at the right price," Cutifani said.
Some analysts speculated that the sale of Boddington could mark the departure of AngloGold from Australia, a country where the cost of operating mines has grown more rapidly than in other countries, pushing a number of companies to the wall.
Cutifani said the underground development at Sunrise Dam gave the mine a 10 year life and the exploration project at Tropicana was shaping up to be a 10-year mine too.
"We don't want the Boddington transaction to signal that we're not interested in Australia. We are. It is expensive to do business there and the ground was well held, but it's become more accessible in the last six months," he said.
"We've got two good assets in Australia. They need more work, but we are going to stick with those assets and we think there are other opportunities in the Australian landscape," he said.
- Miningmx.com
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