Moody’s upholds AngloGold Ashanti’s ratings after downgrade watch

AngloGold AshantiCredit rating agency Moody’s has maintained AngloGold Ashanti’s Baa3 rating and a stable outlook after placing the company and 11 other mining companies in the Europe, Middle East and Africa region, on review for downgrade in January.

The 12 mining companies in the region and their subsidiaries, were part of 55 mining companies around the world placed on downgrade watch by Moody’s, due to the shift in global mining credit conditions and the rating agency’s efforts to adjust their ratings in accordance.

The rating agency said the confirmation of AngloGold’s rating and the stable outlook was due to financing of some debt and lowering of operating costs.

AngloGold Ashanti in September 2015, repurchased $779 million of its $1.25 billion notes due in 2020, reducing the interest on them by $66 million a year. Cost reduction initiatives started in 2013 have reduced the mining giant’s all-in sustaining costs from $1,195 per gold ounce to around $860 per gold ounce currently.

“The confirmation of AngloGold Ashanti’s Baa3 rating is based upon deleveraging and further operating cost savings initiatives that the company delivered in 2015.”

“They have continued their track record of adherence to conservative financial policies and a proactively managed prudent liquidity profile with active engagement with stakeholders in their portfolio of mines to mitigate geopolitical risks,” Douglas Rowlings, a Moody’s Analyst said.

According to Moody’s, the downturn in global mining credit conditions was due to the slowdown in China’s economy and the strong dollar weakening price to record lows, since China is a significant consumer and many metals trade by the dollar.

With 17 mines in nine different countries, Moody’s says AngloGold’s 51.7 million-ounce reserve base translates into $53 debt per gold ounce “which compares favourably with similarly rated gold peers.”

“A long dated debt maturity profile along with proactive liquidity and mine configuration
management provide shock absorption for unforeseen risks and allow the company time to take measures to appropriately align operations to unchartered operating conditions,” the agency said.

It warned that though gold has not experienced the price drop that other base metals have, it is still a volatile commodity whose price is difficult to predict and needs to be approached with a focus on cost efficiency, prudent project development and low financial risk, in terms of leverage and liquidity.

By Emmanuel Odonkor

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