South African gold major AngloGold Ashanti, which is trimming its sails to adapt to the storm engulfing the gold sector, has mandated three banks to organise a series of investor meetings.

The JSE- and NYSE-listed gold company has instructed Citigroup, Deutsche Bank and Goldman Sachs to organise a so-called ‘fixed income roadshow’ across Europe and the US.

These investor meetings are expected to serve as an update on AngloGold Ashanti’s credit profile, ahead of its plans to access the capital markets with a US dollar senior notes offering at a date that the company is committed to announce before the end of this year.

The move is seen as one part of a series of actions aimed at coping with a gold price that has fallen 25% since the start of the year.

New AngloGold Ashanti CEO Srinivasan Venkatakrishnan (Venkat), who is the company’s former CFO, has already backstopped the debt maturity that is due to arise in May 2014 with a term facility from banks.

“They’ve still got more than enough cash as a standby if they need it to deal with the convertible, which expires next May. The roadshow is really about what is the best deal they can get on the market,” a company associate commented to Mining Weekly.

Venkat has given the assurance that there will be no issuance of equity-linked instruments to refinance the convertible loan.

The balance sheet remains liquid and Venkat has pointed out that there is no imminent maturity of any major facility that could not be funded by the com- pany’s cash resources.

In May, available liquidity to draw on was a robust $3.4-billion and net debt to earnings before interest, taxes, depreciation and amortisation, at 1.06 times, was well within the three-times limit.

The strategy is to maximise sustainable free cash flow from what some analysts continue to see as a high-quality portfolio of mining assets and to allocate capital expenditure in a manner that ensures continued free cash.

Mines being turned around are kept on an extremely tight funding leash and mines deemed no longer suitable will be harvested for cash, fixed or sold.

The company’s own chequebook will be used to extract value out of the portfolio and the common accountants’ mistake of ‘toe-cutting’, or damaging a business’s long-term viability, will be avoided.

Debt restructuring is one of a series of remedial actions that have included head-office cutting, project suspension and outright sale, with an eagle eye being kept on the 150% entry-level wage increases being demanded by the Association of Mineworkers and Construction Union and the 60% rock-drill-operator wage increases demanded by the National Union of Mineworkers.

The plan is to enter next year in a financially and operationally fit state.

“They don’t feel it’s a crisis, even though the gold price is causing huge problems for everybody,” a commentator remarks.

AngloGold Ashanti has reviewed the carrying value of its mining assets, including ore stockpiles and all reserves and resources are being revised to reflect lower price assumptions.

An after-tax impairment of up to $2.6-billion on realisable value will be recorded in the second quarter, a period during which it met production guidance, with 935 000 oz produced at a total cash cost of up to $920/oz.

Detailed second-quarter results are due in August.

The $220/oz second-quarter gold price drop has prompted the company to sharpen its focus on efficiency and tighten its grip on costs, overheads and capital.

The world’s third-largest gold producer, with 21 operations in ten countries and a selection of exploration assets, AngloGold Ashanti has two mines that will begin producing before year-end and one, possibly, as early as October.

Together, these two joint venture projects are expected to add up to hundreds of thousands of additional ounces of gold at below-average cost.

Capital is being directed at the highest-quality assets, and partners may be sought for projects.

Exploration spend is being cut and overhead costs rationalised.

Details of progress made on these cost-saving and efficiency improvement programmes will be provided next month, along with second-quarter financial results.

The company’s share currently has a consensus rating of ‘hold’.

The company has still to announce the name of the successful suitor of its Navachab mine, in Namibia, which is being sold.

It must also still report progress on its targeting of savings equating to $100/oz.

On the one hand, the gold major’s former CFO is “focused on every single cent going out of the company” and, on the other, he is going all out to bring another 600 000 oz/y of profitable gold into the mix from the Tropicana project, in Australia, Kibali, in the Democratic Republic of Congo, and Cripple Creek & Victor, in the US.

Cost-reduction initiatives across the group include nickel-and-dime skimping – for example, photocopying and paper- clipping quarterly publications rather than sending them out to be printed.

The 50-day moving average of the AngloGold Ashanti share price is $15.37, with market capitalisation down at $4.935-billion from more than $10-billion previously.

AngloGold Ashanti has announced the retirement of Tony O’Neill, who acted as Venkat’s joint CEO while the board sought a replacement for Mark Cutifani, who has taken over as CEO of Anglo American.