Johannesburg - AngloGold Ashanti’s wholly-owned subsidiary, AngloGold Ashanti Holdings, is offering to buy back up to $810 million-worth of its outstanding bond.
The repurchase, in the high-yield 8.5 percent bonds, is a bid to reduce debt and lower interest payments.
AngloGold Ashanti has a $1.25 billion bond that matures in 2020.
At the end of the June, marking the end of its second quarter, AngloGold Ashanti’s net debt was $3 million, and it said it would improve balance sheet flexibility by asset sales, terming out debt and raising its debt covenant.
The company will use cash on hand and borrowings under existing facilities, if it needed to, to repurchase the debt, which is around R10.5 billion.
AngloGold Ashanti has just completed the sale of its Cripple Creek & Victor gold mine in Colorado to Newmont Mining Corporation for $820-million. The proceeds from this sale, which drops its net debt to operating income ratio down to 1.44 times, will go into funding the bond repurchase, it says.
CFO Christine Ramon says the repurchase “is another decisive step forward in our strategy of cutting debt and reducing our interest bill in order to improve free cash flow”.
In the three months to June, AngloGold Ashanti reported free cash flow of $71 million.
“Our aim remains to sustainably improve cash flow, through operational improvements and lowering interest costs, whilst maintaining sufficient liquidity,” Ramon added in a statement on Monday.
The listed miner, the world’s third-largest gold producer, has been cutting costs in response to the lower gold price, which has recently dropped to multi-year lows.
It has trimmed overhead expenditure by more than two-thirds since the end of 2012, while lowering all-in sustaining costs by about a quarter over the same period
Assuming the offer is fully taken up, AngloGold Ashanti’s annual cash interest expense will decline by about $69 million, to about $170 million, it says.
“The company will continue to have significant sources of liquidity, including undrawn headroom in its various revolving credit facilities, of about $1.1 billion, and cash of approximately $400 million. These could be utilised to weather gold price volatility and unforeseen interruptions in production if required.”
IOL