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AngloGold Ashanti, the last remaining gold counter in the JSE’s Top40 Index and largest in terms of market capitalisation, is set to report fourth-quarter and full-year results for the 2015 financial year on 22 February.
Debt
One of the key focus areas for investors will be the group’s progress in reducing its debt and respective interest repayments.
Large levels of debt had previously (in the 2014 financial year) given rise to the idea of restructuring some of the group’s assets as well as recapitalising through a rights issue.
However, this notion was ultimately viewed in a negative light by shareholders and was quickly abandoned.
The company has since progressively and arduously been targeting cost efficiencies to aid debt reduction.
AngloGold Ashanti is striving towards achieving a net debt to adjusted EBITDA (earnings before interest tax depreciation and amortisation) ratio of 1.5 times.
By the end of the third quarter of 2015, the group had managed to bring the ratio down to 1.56 times, after repurchasing $779m of high-yielding bonds utilising cash from the sale of its Cripple Creek operations in Colorado, USA.
Production and cost
The miner reached a three-year wage deal with the majority of its employees in October.
It also experienced a relatively ‘light’ quarter in terms of power disruptions.
These two factors would suggest that the group might have been able to achieve fourth-quarter production towards the upper end of the 900 000oz to 950 000oz targeted range (3.8m oz to 4m oz for the full year).
Total cash costs for the year are expected to be between $720/oz and $770/oz, while all-in-sustaining costs for the year are expected to be between $950/oz and $980/oz.
Estimates
A Bloomberg consensus of analyst estimates predicts that the 2015 financial year results to show revenue of $4.02bn and EBITDA of $1.15bn.
The adjusted earnings per share figure is expected at 17.5c (US dollar), reflecting positively on cost-cutting initiatives the company has embarked on over the course of the 2015 financial year.
A Thompsons Reuters poll of 14 analysts indicates an average rating of buy for the share.
The fundamentals for gold currently look to be quite accommodating as slowing growth and deflationary threats prompt the maintenance and extension of loose monetary policy globally, which combined with geopolitical worries have supported safe-haven accumulation of the precious metal.
Gold counters have however exaggerated the short-term gains in the commodity price with AngloGold Ashanti trading around 125% higher than it did at August lows last year.
The moves could be indicative of a longer-term trend reversal for local gold counters, although market participants might see the recent rally as overextended and those with a bullish bias might hope for short-term weakness as an opportunity for longer-term accumulation.
