AngloGold Ashanti CEO Srinivasan Venkatakrishnan. Picture: MARTIN RHODES
AngloGold Ashanti CEO Srinivasan Venkatakrishnan. Picture: MARTIN RHODES

ANGLOGOLD Ashanti’s sterling efforts at paring debt have raised expectations of a dividend payment — a comfort the gold miner has not offered its shareholders since 2013.

The miner has posted a net loss of $85m for the year to end-December, compared with a $58m loss the year before, as gold production fell 11% and the dollar gold price weakened 8%.

But it has reduced its net debt by nearly $1bn during the course of last year, lowering it to $2.19bn from $3.13bn.

"We were carrying $1bn more debt than we liked and we’ve met our target of cutting that. What we are looking at now is how to optimise our interest bill further, because by cutting that bill you generate more free cash flow," CEO Srinivasan Venkatakrishnan said on Monday.

AngloGold has $475m remaining of a $1.25bn high-yield convertible bond carrying an 8.5% coupon on its book, which it has the option to redeem in July. The bond had attracted interest of $107m a year, but AngloGold made a cash offer to bond holders and bought back $775m of the bond.

It sold its Cripple Creek & Victor Gold Mine in the US for $820m last year to raise money towards clearing the bond. The sale fed into the gold output drop for the year to 3.947-million ounces, compared with 4.436-million ounces the year before.

Analysts identified the rump of this bond as the best portion of debt to remove to bring down interest payments and further strengthen the company’s balance sheet.

But they were also keen for AngloGold to resume dividend payments, as the company last rewarded shareholders in the first quarter of 2013.

"If your net debt is lower, would you consider paying a dividend … when should we start pencilling in that dividend?" Allan Cooke, analyst at JP Morgan Cazenove, asked at a results session on Monday, pointing to the higher gold price and improved cash flows in AngloGold, which recorded $160m of free cash flow in its fourth quarter.

AngloGold executives would not be drawn on when dividends would resume.

"We are not locked into a particular number or a particular time," Mr Venkatakrishnan said. "It’s obviously a function of where the gold price trends are heading and free cash flow generation. We are getting closer to dividend distribution as every day goes by."

Two-thirds of AngloGold’s production is exposed to currencies that are persistently weaker against the dollar in SA, Brazil, Argentina and Australia. But the lower oil price has benefited its open-cast, mechanised mines.

Underpinning the improvement in the company’s fortunes would be the recovery of what was a "torrid third quarter from a safety point of view with the loss of life" at South African mines, where 112,800oz of gold had been unmined because of safety-related stoppages, said Chris Sheppard, the CEO in charge of the South African mines.

"I’m confident we will see a 10% uplift in production for this financial year," he said.

Local mines generated 1-million ounces of gold last year — about a quarter of AngloGold’s annual output — with lower grades adding to the decline.

AngloGold forecast it would produce between 3.6-million and 3.8-million ounces.

The reason for the decline was the first full year of no production from Cripple Creek & Victor, as well as the full shutdown of the Obuasi mine in Ghana, which had limited production last year, and declining production from the ageing mines in Mali, Mr Venkatakrishnan said.

On the perennially loss-making Obuasi mine, it was looking to complete a feasibility study and agreements with the Ghanaian government to offer potential partners a sound investment package to bring them in to redevelop the mine, he said.

Last year Randgold Resources, a partner with AngloGold at two other African mines, opted out of a joint venture at Obuasi, saying the project did not meet its investment hurdle rates and citing the inability of the Ghanaian government to speedily agree to a fiscal package.

Asked if AngloGold still considered the mine to be a core asset, after the setback with one of the smartest gold operators in Africa, Mr Venkatakrishnan said: "As managers we have to be completely unemotional with assets … at the right price and right terms every asset needs to be looked at, and Obuasi is no exception."

Pushed on whether there had been any offers to purchase the mine outright, Mr Venkatakrishnan said: "At various points in time we have, but they’ve not progressed to a point of concluding a sale, but there’s a lot of interest now in the Obuasi assets, even in the form of a joint venture."