Ratings agency Moody’s Investors Service has rated miner AngloGold Ashanti’s decision to sell its remaining South Africa operating assets to Harmony Gold Mining Company as credit positive.
This is because it reduces the company’s average all-in sustaining cost (AISC) by about 2.4% and allows it to recycle capital into growth projects that have lower cost structures and higher returns on equity, such as the Obuasi development project, in Ghana, Moody’s says.
Moreover, it says the transaction reflects positively on the company’s disciplined approach to capital allocation.
AngloGold reported an AISC of $1 002/oz for the first six months of 2019, and Moody’s estimates that, excluding the South African operations, the AISC will decrease to about $978/oz.
It stresses that a lower cost structure is important for gold miners as it allows them to better withstand periods of low gold prices without being reliant on adding new debt to fund negative cash flows.
Moody’s points out that the most important asset being sold as part of the transaction is the mature Mponeng mine, which has a high cost structure and a remaining mine life of eight years.
AngloGold would have had to make a large capital investment in the near future to extend the mine.
Moody’s notes that the company’s overall scale of production and portfolio diversification will not deteriorate as a result of the sale as it is more than offset by the recent completion of the Obuasi mine redevelopment.