JOHN Paulson, the billionaire whose hedge fund is the largest shareholder of AngloGold Ashanti, said Africa’s largest producer of gold might increase in value if it were to split in two.
"We are exploring ways for AngloGold to improve its valuation," Mr Paulson’s New York-based hedge fund said in a year-end report that was obtained by Bloomberg News.
"Based on our analysis, AngloGold’s shares could increase in value by up to 68% if the company was to split its business into South African and non-South African businesses."
Johannesburg-based AngloGold appears to be "exploring options to improve their valuation," Paulson & Company said in the report about the company’s Advantage funds.
Gold Fields, another South African gold miner in which Mr Paulson invests, said in November it planned to spin off most of its operations in the country.
Gold Fields said it would create a new company that would trade in Johannesburg and New York.
"AngloGold could also unlock value if it split into two companies: a high-growth international business, and a mature, high-dividend-paying South African company," Paulson & Company said.
AngloGold’s American depositary receipts (ADRs) rose 4.6% to close at $29.30 yesterday in New York. They have declined 36% in the past 12 months.
"AngloGold Ashanti values the views and feedback from all of its shareholders," Stewart Bailey, a New York-based AngloGold spokesman, said yesterday. "The board of directors and executive team are committed to maximising value for all shareholders and consistently look at all options to enhance shareholder returns."
Armel Leslie, a spokesman for Paulson & Company, declined to comment.
The New York-based firm, which manages $18bn in assets, has a 7.4% stake in AngloGold.
Mr Paulson’s $4.9bn Advantage funds, which seek to profit from corporate events such as takeovers and bankruptcies, and the $1bn Gold Fund, which buys bullion-related equities and derivatives, fell last year.
Mr Paulson’s Advantage Plus fund, which uses leverage to amplify returns, dropped 19% on bets that gold stocks would rise and that the European sovereign-debt crisis would worsen, while the Gold Fund slumped 25% last year.
Gold stocks fell 9.6%, including reinvested dividends, last year as investors bought exchanged-traded bullion funds for exposure to the metal’s now 12-year rise, while producers battled surging costs to build and operate mines.
Paulson & Company remains convinced gold stocks are undervalued and that the metal will climb and protect against rising inflation, according to a year-end report about the firm’s Gold Fund.
"We remain positive on the outlook for gold, given the magnitude of the quantitative easing programmes implemented by central banks around the world," Paulson & Company said.
"While inflation has been subdued to date, this aggressive expansion of the monetary base creates the potential for future inflation," it said.
AngloGold, the Advantage funds’ biggest long position, or bet that a security will rise, said last month that CEO Mark Cutifani would leave on March 31 to become CEO of Anglo American.
AngloGold in November halved its dividend and cut planned spending by $200m after its South African mines were closed because of unauthorised work stoppages. It also operates in Mali, Australia, Brazil, Colombia and the US.
Mr Cutifani said last year AngloGold had no immediate plans to split the business, an option the company has considered before.
"We have no plans today to split the business, but all options must remain open," he said late last year.
"If at end of the day if we can’t get true value reflected for the global mix, then we have to look at all options. We’ve become a global company. South Africa is important, but it’s not critical."
In October, John Hathaway, MD at Tocqueville Asset Management, said AngloGold and Gold Fields should separate their troubled mines in SA from their foreign assets.