International – South African gold miner AngloGold Ashanti has agreed to sell its Cripple Creek & Victor mine in the US to gold and copper producer Newmont Mining for $820 million in cash, plus a net smelter return royalty, as part of its strategy to cut debt, the company announced on Tuesday.
AngloGold said in a statement that the $820 million in cash proceeds from the sale of Cripple Creek & Victor will immediately strengthen the company’s balance sheet and allow it to implement a deleveraging strategy to lower financing costs.
AngloGold Ashanti will also no longer have to fund the remaining capital of approximately US$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.
Newmont will fund the acquisition with net proceeds generated from a common equity issuance of 29 million shares, and supplemented with cash from its balance sheet.
“After a competitive bidding process, we’re pleased to have arrived at a transaction that recognises the value of this asset.”
“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.
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.
The company recorded all-in sustaining costs that were 18% lower on average last year than in 2012, reflecting discipline in operating expenditures, corporate overheads, exploration and capital investment.
The quality of AngloGold Ashanti’s diversified asset base, which has good exposure to lower oil prices and weaker local currencies, has also continued to improve, with the new, low-cost Kibali joint venture in the Democratic Republic of Congo ramping up to full production, and the Tropicana operation in Australia now at planned output levels.
“Our focus continues to be on creating a long-term, high-margin gold portfolio,” Venkat said, adding that its two new operations are going from strength to strength, its core cash-generating mines continue to perform well and getting a strong tailwind from lower oil prices and weaker currencies – all while keeping its long-term options intact.
Commenting 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.”
“Funding the acquisition with equity allows Newmont to maintain financial flexibility while continuing to develop profitable projects,” Goldberg said.
The transaction is expected to close in the third quarter of 2015, subject to regulatory approvals and the satisfaction of other conditions precedent