AngloGold Raises $1.37 Billion to Cancel Gold Hedges
September 15, 2010, 11:54 AM EDTBy Ron Derby and Alastair Reed
(Updates with closing shares in fifth paragraph.)
Sept. 15 (Bloomberg) -- AngloGold Ashanti Ltd., Africa’s largest gold producer, will sell shares and convertible bonds and use about $1.37 billion raised to buy itself out of supply accords that stop it benefiting from record prices of the metal.
This will “give us full exposure to the gold price,” Mark Cutifani, chief executive officer of the Johannesburg-based company, said in a statement today.
AngloGold, held 12 percent by hedge-fund firm Paulson & Co., is taking advantage of prices that are rising for a 10th straight year to reduce so-called forward sales agreements at lower levels. Barrick Gold Corp., the world’s largest producer of the metal, spent almost $5 billion last year to cancel such hedges against the risk of prices declining. AngloGold said today it sees a “strong gold price environment” next year.
The metal, which reached a record $1,274.95 an ounce yesterday, was up 15 percent this year at $1,264.40 by 4:42 p.m. in London. Hedges were cut by 780,000 ounces to 6.75 million ounces in the first quarter, researcher GFMS Ltd. said in June.
AngloGold fell 16.20 rand, or 4.9 percent, to 316 rand by the 5 p.m. close of trading in Johannesburg, the biggest drop since Sept. 21, 2009. The company said its hedging contracts were set at an average gold price of less than $450 an ounce.
“Down the road it’s a positive for them,” Peter Davey, mining research chief at London’s Ambrian Capital Plc, said today. Ounces were being sold at “ridiculously cheap prices.”
Over-Allotment
AngloGold, with operations in Ghana, Brazil and Colombia, expects to raise $686 million selling 15.8 million shares at $43.50 an American depositary share, or 308.7 rand an ordinary share. The company will raise the same amount again by selling an equivalent number of convertible bonds, it said.
There’s an over-allotment option to sell a further 2.37 million shares and the same number of bonds, boosting possible proceeds to about $1.58 billion, Chief Financial Officer Srinivasan Venkatakrishnan said today on a conference call.
By June, the value of hedge transactions was almost $2.41 billion, AngloGold said. The company will also use funds from credit facilities and cash on hand to close hedges, it said.
--With assistance from Carli Lourens in Johannesburg. Editors: Tony Barrett, Alastair Reed
To contact the reporter on this story: Ron Derby in Johannesburg at rderby1@bloomberg.net Alastair Reed in Johannesburg at areed12@bloomberg.net
To contact the editor responsible for this story: Amanda Jordan in London at ajordan11@bloomberg.net
