London - South Africa’s central bank pressed mining group AngloGold Ashanti to increase the size of a planned share sale that’s opposed by billionaire hedge-fund manager John Paulson, people familiar with the matter said.
AngloGold, based in Johannesburg, had initially sought to raise just over $1 billion (R11 billion) from investors to strengthen its balance sheet, the people said, asking not to be identified because the matter is private.
That was increased to $2.1 billion (R23 billion) to satisfy the concerns of the South African Reserve Bank, the people said.
The bank’s insistence may help explain why the gold miner is moving forward with a plan that saw its shares fall by the most ever and drew criticism from investors.
Paulson, whose Paulson & Co. hedge fund owns about 6.6 percent of AngloGold, called the size of the share sale “value-destructive” on September 10 and said he would vote against it, while praising the concept of a split of international operations.
Paulson and other large investors made their displeasure clear on a heated conference call with AngloGold executives the same day, two of the people said.
The central bank wanted to ensure the South African remnant of AngloGold would have the financial flexibility to invest in domestic mines, and that it wouldn’t be saddled with debt that the company had used to build up international operations slated for separation, the people said.
The bank’s approval is needed in order for the split to take place.
Win Approval
AngloGold executives concluded in those discussions that the larger sale would be the only way to win regulatory approval for their desired split plan, and came around to the view that a better-capitalised South African entity would benefit shareholders in the long run, they said.
The Reserve Bank wasn’t immediately able to comment, spokeswoman Nosipho Theyise said when contacted by phone and didn’t respond to e-mailed questions.
A representative for AngloGold declined to comment on discussions with the central bank.
Not all investors oppose the share sale.
London-based Old Mutual plans to support the issuance of new shares, though it’s undecided on the split, fund manager Michael Schroder said by phone.
South Africa’s economy and mining industry are struggling amid labour unrest and weak prices for commodities like gold and platinum.
Strikes over pay and working conditions at mines have led to violence, including a 2012 shooting of 34 protesters by police at Lonmin’s Marikana mine.
Africa’s second-largest economy after Nigeria is forecast to grow at the slowest pace this year since a 2009 recession.
AngloGold would be the second major South African mining group to separate its international operations after Gold Fields did the same in 2013.
A previous effort by AngloGold to split, an idea proposed by Paulson and other investors, was rebuffed by government officials last year, people familiar with the matter said at the time.
BHP Billiton, the world’s largest diversified miner, has also said it will include all its South African operations in a plan to separate aluminum, coal and manganese assets from the rest of its portfolio.
Meanwhile, Anglo American Platinum is seeking buyers for some of its South African mines after a five-month strike closed shafts earlier this year. - Bloomberg News