S&P sounds warning on AngloGold

2012-10-18 07:40

Johannesburg - Ratings agency Standard & Poor's on Tuesday warned it could downgrade the credit rating of AngloGold Ashanti [JSE:ANG].

"We believe that country risk for South African gold miner AngloGold Ashanti Ltd (AngloGold) has increased in light of continuing strike action in South Africa and the possible implications of increasing social tensions for the mining industry," the agency said in a statement.

It had placed the gold miner on "CreditWatch negative".

AngloGold currently had a BBB- rating, meaning it was at the lowest investment grade for market participants. The CreditWatch placement meant there was a 50% chance it could move one notch down to BB+, or being considered speculative grade.

The CreditWatch placement also reflected a potential rise in the company's unit cash cost, which S&P already considered comparatively high. There was a risk costs could increase due to wage increases, or general inflationary pressure.

On average in 2011, AngloGold's unit cash cost was $728 per ounce of gold, compared with the industry average of $600 to $650.

The unit cash cost in the second quarter of 2012 was $801 per ounce.

"We aim to resolve the CreditWatch placement by the end of December, after meeting with management and gaining further insight into the company's ability to reduce its exposure to country risk or better manage its cash cost."

  • hendrikvs - 2012-10-18 08:04

    And who do we and Anglo Gold have to thank?

      sandra.j.rennie - 2012-10-18 13:41

      Well if you watched Richard Pike last night on TV 412 he maintained salary should equal productivity ! So it's lack of productivity - bring in the Chinese !

  • Brian Dorning - 2012-10-18 08:48

    Well after the white minority rule and Apartheid, SA is even more useless than before. The government has made promise after promise and has failed the people of SA!

      millionwatts1 - 2012-10-18 09:37

      Whites are better off now than during apartheid. Its majority blacks who have been left out.

      acm.munro - 2012-10-18 11:48

      It is not a question of whites or blacks being better off or not - its a problem between 'haves' and 'have-nots'. Poverty breeds poverty. For instance: A and B gets married, they have 2 kids, they get married, also have 2 kids each, so A and B have 4 grandchildren. C and D get married, they have 5 children (or more ...), they get married and also have 5 children, so C and D have 25 grandchildren - say there are 1 million C and D grandparents = 25 million grandchildren who has to be fed, educated, houses, etc. No Government anywhere in the world can supply all this. Get the picture?

  • denis.dendrinos - 2012-10-18 09:31

    So at the end of the day, it'll be more expensive for them to do business. More expensive to buy electricity, more expensive to run hostels, more expensive to run drills. And more importantly, more expensive to borrow money to keep things afloat and for expansion. Oh man, are these mines gonna start closing! "We don't know what we'll be going back into. If the repair costs to recover those areas are too significant, then we won't go back and so there will be immediate downsizing." Now those costs could be guaranteed to be more!

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