It seems AngloGold Ashanti, one of South Africa’s largest gold producers, is finally shaking its underperforming assets ‘off its back’, leaving it to focus on its big cash generating mines like Kibali.
Yesterday the company announced that it has signed a binding agreement to sell its entire interest in AngloGold Ashanti Namibia (AGAN), a wholly owned subsidiary which owns the opencast Navachab gold mine situated 10 km south west of Karibib, to a wholly-owned subsidiary of QKR Corporation.
QKR describes itself as a private mining company focused on acquiring and building a diversified portfolio of development and growth assets in the EMEA region and Americas.
By comparison with AngloGold’s entire portfolio, Navachab’s contribution to the group is miniscule. In 2012, production at the operation was equivalent to only 1.9% of total group production and 5% of that for the continental Africa region, despite its production rising 12% (compared to the previous year) to 74 000oz at a total cash cost that decreased by 10% to $929/oz. A mine of this size holds little or no value to a company of AngloGold’s size.
The sale of Navachab is a good example of an asset that is too small to deliver true value to a major but could offer substantial cash returns to a smaller company whose overheads are smaller. Such companies have the ability to invest time and effort into the operation and benefit from its production cash offering.
A report released by AngloGold in 2012 indicated Navachab’s lifespan extends for another 12 years to 2026 which any junior or small mining company would welcome with open arms.
The agreement provides for an upfront consideration based on an enterprise value of US$110 million which will be adjusted to take into account AGAN’s net debt and working capital position on the closing date of the transaction. The upfront consideration is payable in cash on the closing date.
“We are executing on our strategy to focus our efforts on assets of scale that drive value in the business,” says Charles Carter, AngloGold Ashanti’s executive vice president of strategy and business development. “We’re pleased to have reached agreement to sell Navachab for fair value in the midst of a difficult market – we believe that QKR is the right group to take Navachab forward.”
Lloyd Pengilly, president of QKR, noted that “Navachab is QKR’s first acquisition and is the result of an extensive review process. We believe Navachab has significant potential and we look forward to working closely with the management, staff and contractors of Navachab, the government of Namibia and Epangelo to steer the mine through its next phase of growth.”
AngloGold Ashanti will continue to operate Navachab until the closing of the transaction.
Considering the operation employs 953 employees and contractors on site, of which just over 400 are permanent staff, the move is a good sign which will ensure the Navachab’s ongoing operation and secure many local jobs in the region.
By: Laura Cornish