International - On Tuesday gold major AngloGold Ashanti closed the sale of the Cripple Creek & Victor mine in the United States to Newmont Mining Corporation for US$820 million in cash.
This is however still subject to customary closing adjustments, plus a net smelter return royalty.
The sale was originally announced on 8 June 2015 and is part of AngloGold’s strategy to cut debt. At the time the company revealed that the cash proceeds from the sale would immediately strengthen the company’s balance sheet and allow it to implement a deleveraging strategy to lower financing costs.
At the closing, AngloGold Ashanti received $819.4 million in cash, which factors in estimated closing adjustments. Newmont is funding the acquisition with net proceeds generated from a common equity issuance of 29 million shares, and supplemented with cash from its balance sheet.
As a result of the deal, AngloGold will also no longer have to fund the remaining capital of approximately $200 million required to complete the Cripple Creek & Victor Mine-Life Extension 2 project, further improving its free cash flow position. Cripple Creek & Victor’s expansion – which is about two-thirds complete, includes a new leach pad and recovery plant.
“This deal significantly de-risks the balance sheet without diluting our shareholders, and places us in a much stronger position – it puts $820 million into our bank account, saves $200 million dollars in capital expenditure, and gives us continued exposure to the asset through an uncapped royalty on future underground production,” AngloGold Ashanti CEO Srinivasan Venkatakrishnan (Venkat) said in June.
Over the past 24 months AngloGold Ashanti has pursued measures to simplify its portfolio, improve cash flow and reduce debt from internal sources in order to enhance financial flexibility.
Commenting in June on the acquisition Newmont president and CEO Gary Goldberg said: “Cripple Creek & Victor represents a value-accretive opportunity for Newmont to improve mine life and costs in a favorable jurisdiction. Consistent with what we’ve achieved elsewhere, we believe we can lower direct mining costs by up to 10% through improved productivity and optimisation. We also look forward to learning from Cripple Creek & Victor’s experts and welcoming their experienced workforce to the Newmont team.”