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Time For AngloGold And Gold Fields To Merge – CIBC

According to analysts at CIBC, it’s time for AngloGold Ashanti Ltd. (NYSE:AU) and Gold Fields Ltd. (NYSE:GFI) to merge as the bank believes the two companies combined would perform better than operating as single entities given the industry issues in South Africa and demands from government. “A new company sporting the combined international asset bases of AngloGold and Gold Fields would deliver 4.3 million ounces of gold per annum at all-in sustaining cost of $870/oz (after assuming CC&V and Sadiola at $800 million) and is currently valued at less than $5 billion,” they say. Analysts propose a three step process – merger the companies, split the merging entity into a South African asset base (including South Deep) and a separate ‘International Company’ (still domiciled in South Africa) and sell or list the South African asset base in South Africa. “The three-step process we propose sees the South African assets sold, or listed, for $1.2 billion,” they say. Analysts say that a move like that would significantly lower debt levels leaving the newly formed “Anglo Fields” as an easier play for acquisition set up as an ‘International Play’, circumventing any long-winded issues with the South African government. CIBC points out the International Play’s importance as they reference AngloGold’s attempt to split the company into an international and local company in 2014, which meant the company would have to pay out billions to the South African government.    

By Alex Létourneau of Kitco News aletourneau@kitco.com

 

Eskom Further Damaging South Africa's Fragile Mining Sector – HSBC

Thursday May 21, 2015 11:35 AM

Price hikes for electricity by Eskom, which provides 95% of electricity in South Africa, could further damage the country’s already shaky gold and platinum sectors, say analysts from HSBC. In a market note, analysts say that Eskom will be raising the average annual price to 12.69% for the 2016 fiscal year. Quoting Mike Teke, president of South Africa’s Chamber of Mines, analysts note that 31% of gold mines and 40% of platinum mines are already operating at a loss. “South African mine producers face a difficult operating environment given rising operating costs such as labor and electricity, inadequate power supply and cheaper metals prices,” HSBC analysts say. However, rising costs could benefit metals prices as analysts “believe the potential for these risks to impact mine supply would be positive for gold and the PGMs in the medium to longer-term.”

By Alex Létourneau of Kitco News aletourneau@kitco.com

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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