MINING FINANCE / INVESTMENT

AngloGold Ashanti could split ops - CEO

Mark Cutifani said the group is considering such a move in order to boost returns to shareholders and increase its valuation

Posted: Monday , 08 Mar 2010

JOHANNESBURG/LONDON (Reuters) - 

AngloGold Ashanti (ANGJ.J), the world's No. 3 gold producer, could split its global business to increase its valuation and boost returns shareholders, its Chief Executive Officer said on Monday.

Mark Cutifani also told the Reuters Global Mining and Steel Summit the group wants to grow its footprint in the Americas, and was seeking an acquisition.

He also hopes to unwind AngloGold's hedgebook sooner than a previous target of 2014, and he forecast rising gold output.

Cutifani said AngloGold, which has 21 operations on four continents, would make a decision in the next 12 to 18 months on whether to split its portfolio.

"If we have to slice the portfolio to get value to shareholders, then that is what we will do," Cutifani said.

"We would like to increase our footprint, particularly in the Americas," he added. "We believe it makes sense to do something of value in the Americas - an acquisition would be very attractive to us, we remain on the lookout."

Cutifani said the consolidation trend in the gold mining industry worlwide was likely to lead to an acquisition in North America this year. AngloGold was unlikely however to be bidding for any of its U.S. peers, which were valued at more than the company itself.

He said AngloGold was unlikely to dispose of any further assets, but would do so if it received an attractive offer.

Cutifani also said AngloGold, Africa's top gold producer, would this year seek to change its name to remove the link to global miner Anglo American Plc (AAL.L). Anglo no longer has any shareholding in the South African based gold producer.

Cutifani said rising costs and deep level mining in South Africa's mature mines were a concern for AngloGold.

"We are seeing a rise of 10 percent year-on-year on a structural costs basis," he said.

"My forecast is that things will get tougher in 2010."

A near 25 percent increase in electricity prices in South Africa for each of the next three years would lead to a doubling of the company's energy costs, he added.

A stronger rand against the dollar could worsen the outlook for gold producers, cutifani said. South African gold producers sell their gold in dollars and pay costs in rand, which has been strong against the greenback.

Cutifani said he was not concerned about nationalization of mines in South Africa as demanded by some in the ruling party, because the government had said it would not grab mines.

TO UNWIND HEDGEBOOK FASTER

Cutifani said AngloGold, Africa's top gold producer, has chipped away at its hedge book -- one of the biggest among its peers globally -- to increase its exposure to the spot price of gold, and take advantage of the gold price rally like its peers.

The Johannesburg-based company plans to settle about 800,000 ounces of gold each year for the next five years.

Cutifani said gold would trade between $1,000 to $1,200 an ounce this year, and anything under $1,100 an ounce presented the company with an opportunity to trim forward sales.

Spot gold was bid at $1,135 an ounce at 1252 GMT, against $1,133.80 late in New York on Friday.

"It would be wonderful for us to get that done ... which I think then reduces the risk of volatility and the tail exposure hurting us longer term," he said.

"I would say a reasonable target for this year would be to do 200,000 ounces better -- you will quickly start to erode that hedgebook, which would leave you with an opportunity maybe in 18 months, two years time when you could settle it fairly quickly."

Cutifani forecast gold Anglogold's output in 2011 at between 4.8 million to 5.0 million ounces from the estimated 4.6 million ounces this year.

He also said AngloGold -- the country's top producer of uranium, which it produces as a by-product of gold -- would invest $50 million to boost output of the energy fuel to 1.8 million pounds a year from 1.4 million pounds.

(Writing by James Macharia; Editing by Hans Peters)