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Rating Action:

Moody's affirms AngloGold Ashanti Limited's Baa3 rating; outlook remains negative

19 Sep 2014

$3 billion of rated debt affected

London, 19 September 2014 -- Moody's Investors Service (Moody's) has today affirmed the Baa3 long-term issuer rating of AngloGold Ashanti Limited (AGA) and senior unsecured ratings of AngloGold Ashanti Holdings plc. The outlook on all ratings remains negative. This follows AGA's withdrawal on 15 September 2014 of the cautionary announcement (dated 10 September 2014) and communication that it will no longer proceed with the proposed restructuring and capital raise, but will continue to prioritise debt reduction and improving financial flexibility.

A full list of the affected ratings is provided at the end of this press release.

"Our affirmation of the rating factors in management continuing to take concrete steps in the near term to reduce leverage in an ensuing volatile gold price environment", says Douglas Rowlings, an Analyst at Moody's and local lead analyst for AngloGold Ashanti Limited. "The decision not to proceed with the proposed restructuring removes substantial uncertainty in relation to how the financial policies and business profile would have evolved under the proposed restructuring. Although the explicit public consideration of such material changes does underline the challenges faced by the business at present, and the need for timely and effective action if the credit profile is to be stabilised".

RATINGS RATIONALE

AGA's Baa3 ratings are supported by a strong liquidity profile, which is actively managed to ensure headroom at all times to accommodate a range of different operational and macroeconomic risk exposures. Similarly, a long dated debt maturity profile and adherence to conservative financial policies act as shock absorbers to unforeseen risks and allow the company time to take measures to appropriately align operations to unchartered environments.

Recently refinanced revolving credit facilities have seen looser financial covenants renegotiated and maturities extended to 2019 under the $1 billion and AUD 500 million facilities and an intention not to use its $1 billion revolving credit facility as a long-term funding solution (currently and for the most part historically undrawn) provides cushioning against events that could put pressure on AGA's liquidity profile. This mitigates against production disruption at the company's South African operations, representing 29% of production for the Last Twelve Months (LTM) ended 30 June 2014, which face a challenging labour and power provision environment and an oscillating ZAR/USD exchange rate (favourable in a weakening environment and detrimental in a strengthening environment as a ZAR-denominated cost base is pitted against a USD revenue stream). This also buys AGA time should there be a steep decline in the gold price to right-size its portfolio of operations to accommodate a new cost regime, which should ensure continued cash flow generation.

The ratings also factor in proactive steps being taken to reduce elevated debt but recognises a number of strategies underway such as (1) introducing further operational efficiencies; (2) reducing overhead structures; and (3) improving underlying business performance. In addition, the Baa3 rating takes into account options available to strengthen the balance sheet is offered in the form of (1) portfolio simplification; (2) a continuation of not paying out dividends in favour of reducing debt; and (3) unlocking intrinsic value from the Columbian project.

AGA's Baa3 rating benefits from scale as the third-largest gold producer globally with a sizeable reserve base. The ratings further capture the company's widespread geographic disbursement of 20 operations in 10 different countries on four continents. In addition, the rating is supported by a management team that remains committed to a transparent and conservative financial approach, which Moody's expects will ensure that necessary measures are taken to preserve liquidity along with managing operating and capex costs to continue to accommodate a sensitised gold price of around $1,200/oz.

The ratings also factors in AGA's operating environment, which includes event risk from negative developments in terms of higher taxes combined with the high political risk and weak institutional strength to which AGA is exposed to in a number of countries in which it operates. The rating positioning recognises that AGA is primarily a single commodity producer, as well as (1) the inherent volatility in the gold price, given the fully unhedged position of the company; and (2) the company being able to maintain stable operating margins and operating cash flow at a gold price around $1,200/oz.

RATIONALE FOR THE NEGATIVE OUTLOOK

The negative outlook reflects execution risk around continuing to deliver on derisking initiatives as negative pressure on the gold price continues to build. This could begin to put pressure on Moody's-adjusted debt/EBITDA as EBITDA generation weakens following from revenues tracking the gold price downwards.

Moody's also sees risks to the potential downward pressure arising from (1) an inability to successfully restructure/monetise the loss making Obuasi mine in Ghana; (2) negative production and cost implications of upcoming gold mining wage negotiations in South Africa following the prolonged strike action and elevated wage increases in the South African platinum sector; and (3) building legislative uncertainty in South Africa around compliance with the revised mining charter and yet-to-be promulgated Mineral and Petroleum Resources Development Act.

WHAT COULD CHANGE THE RATINGS DOWN/UP

Downward pressure on AGA's rating would likely arise owing to heightened operating risks in any of its operating assets that leads to a material deterioration in operating performance. The rating would also come under negative pressure if the company was unable to adjust its cost base in light of lower gold prices such that (1) total debt/EBITDA exceeds 3.25x; (2) cash flow from operations minus dividends/debt falls below 20%; and (3) its liquidity profile weakens materially.

Upward rating pressure could occur if AGA's (1) debt/EBITDA is sustainably less than 2.0x under Moody's forecast assumptions; (2) cash flow from operations minus dividends/debt exceeds 30% on a sustainable basis; (3) AGA is able to sustainably generate positive free cash flow; and (4) liquidity is robust.

The principal methodology used in these ratings was Global Mining Industry published in August 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Headquartered in South Africa, AngloGold Ashanti Limited is a global gold mining company operating out of 20 locations in South Africa and Continental Africa, North and South America, and Australia. With a production of 4.4 million ounces of gold and revenues of $5.44 billion for the LTM ended 30 June 2014 after eliminations, AGA ranks as the world's third largest gold producer. In South Africa (29% of production as of LTM ended 30 June 2014), AGA has five deep level operations and two surface operations, while most of its operations in other countries are open pit. The company is listed on the New York, Johannesburg, Ghanaian, London and Australian stock exchanges.

List of affected ratings

Affirmations:

..Issuer: AngloGold Ashanti Limited

.... Issuer Rating (Foreign Currency), Affirmed Baa3

..Issuer: AngloGold Ashanti Holdings plc

....US$1250M 8.5% Senior Unsecured Regular Bond/Debenture (Foreign Currency) Jul 30, 2020, Affirmed Baa3

....US$700M 5.375% Senior Unsecured Regular Bond/Debenture (Foreign Currency) Apr 15, 2020, Affirmed Baa3

....US$300M 6.5% Senior Unsecured Regular Bond/Debenture (Foreign Currency) Apr 15, 2040, Affirmed Baa3

....US$750M 5.125% Senior Unsecured Regular Bond/Debenture (Foreign Currency) Aug 1, 2022, Affirmed Baa3

Outlook Actions:

..Issuer: AngloGold Ashanti Limited

....Outlook, Remains Negative

..Issuer: AngloGold Ashanti Holdings plc

....Outlook, Remains Negative

The Local Market analyst for this rating is Douglas Rowlings, 971-4-237-9543.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Gianmarco Migliavacca
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

David Staples
MD - Corporate Finance
Corporate Finance Group
Telephone: 00971 4237 9536

Releasing Office:
Moody's Investors Service Ltd.
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Canary Wharf
London E14 5FA
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JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's affirms AngloGold Ashanti Limited's Baa3 rating; outlook remains negative
No Related Data.
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