AngloGold Ashanti today announced that its wholly owned subsidiary, AngloGold Ashanti Holdings plc (“AGAH”), is offering to buy back up to $810,000,000 in aggregate principal amount of its outstanding 8.5% high-yield bonds that mature in 2020, as part of its strategy to reduce debt and lower interest payments.
AGAH will use cash on hand, following the sale concluded earlier this month by the group of the Cripple Creek & Victor (CC&V) mine in the United States, and borrowings under existing credit facilities if needed, to repurchase this debt. The repurchase will utilise cash that is attracting little or no interest, to eliminate debt on which the company is currently paying 8.5% interest.
“This is another decisive step forward in our strategy of cutting debt and reducing our interest bill in order to improve free cash flow,” Christine Ramon, Chief Financial Officer of AngloGold Ashanti, said. “Our aim remains to sustainably improve cash flow, through operational improvements and lowering interest costs, whilst maintaining sufficient liquidity.”
AngloGold Ashanti has responded to lower gold prices by cutting overhead expenditure by more than two-thirds since the end of 2012, whilst lowering all-in sustaining costs by about a quarter over the same period. In addition, the group has introduced two new, low-cost mines, closed higher-cost assets, removed unprofitable ounces from its portfolio and sold CC&V for $820m*, plus a net smelter returns royalty, to reduce net debt. It is now intensifying efficiency efforts to complement cost benefits from weakening local currencies and falling oil prices.
Assuming the offer is fully taken up, AngloGold Ashanti’s annual cash interest expense will decline by about $69m, to about $170m. The Company will continue to have significant sources of liquidity, including undrawn headroom in its various revolving credit facilities, of about $1.1bn, and cash of approximately $400m (all calculated at current exchange rates). These could be utilised to weather gold price volatility and unforeseen interruptions in production if required.