AngloGold Ashanti says it has cut its net debt by 30% in 2015

AngloGold AshantiAngloGold Ashanti today announced that it has cut its net debt by 30 per cent in 2015.

In a press release issued today February 22, 2016 and copied to, the gold miner indicated that in addition to cutting its net debt by almost a third last year after margins increased despite lower gold prices, it also generated free cash flow of $160m in the fourth quarter.

AngloGold Ashanti delivered on a range of self-help measures last year to reduce debt using internally generated funds, without diluting shareholders, it said, adding that the Cripple Creek & Victor mine in the US was sold for $820m plus a royalty, and most of the proceeds were used to buy back a portion of the company’s most expensive debt.

“At the same time, a strong performance from the company’s international mines helped expand margins even as gold prices fell,” AngloGold said.

According to the company net debt fell by 30 per cent to $2.19 billion from $3.13 billion at the end of 2014, lowering the amount the company will pay in interest charges.

“All-in sustaining costs (AISC) improved to an average of $910/oz in 2015, more than 11 per cent lower than the $1,020/oz recorded the previous year, and lower than guidance of $950/oz to $980/oz.  Production of 3.95Moz was at the top end of guidance of 3.8Moz to 4.0Moz,” it said.

AngloGold Ashanti announced in August 2015 that its wholly owned subsidiary, AngloGold Ashanti Holdings plc (AGAH), was offering to buy back up to $810 million in aggregate principal amount of its outstanding 8.5 per cent high-yield bonds that mature in 2020.

This move the company said at that time was part of its strategy to reduce debt and lower interest payments.

Christine Ramon, Chief Financial Officer of the company was quoted at that time as saying, “This is another decisive step forward in our strategy of cutting debt and reducing our interest bill in order to improve free cash flow. Our aim remains to sustainably improve cash flow, through operational improvements and lowering interest costs, whilst maintaining sufficient liquidity.”

Meanwhile, in December 2015, Randgold Resources Limited abandoned a joint venture with AngloGold Ashanti to redevelop its Obuasi mine, currently in limited operations phase – the redevelopment plan did not meet Randgold’s internal investment requirements.

The two announced a joint venture on September 16, in which Randgold was to lead the preparation of a development plan for the Obuasi mine, building on an earlier feasibility study by AngloGold.

The miner also noted that production guidance for 2016 is estimated to be between 3.6Moz to 3.8Moz, with total cash costs estimated to be between $680/oz and $720/oz and all-in sustaining costs between $900/oz and $960/oz at average exchange rates against the US dollar of 15.00 (Rand), 4.00 (Brazil Real), 0.70 (Aus $) and 14.90 (Argentina Peso), with oil at $35/bl average for the year.

“Capital expenditure is anticipated to be between $790 million and $850 million, of which $120 million to $140 million is earmarked for projects.”

Corporate and marketing costs are estimated to be between $75 million and $90 million and expensed exploration and study costs including equity accounted investments at $130 million to $150 million. Depreciation and amortisation is forecast at $820 million and interest and finance costs are expected to be $190 million (income statement) and $175 million (cash flow statement), the release said.

By Emmanuel K. Dogbevi

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