London, 13 June 2017 -- Moody's Investors Service, ("Moody's"),
has affirmed the Baa3 long-term issuer rating of AngloGold Ashanti
Limited (AGA) and the Baa3 senior unsecured ratings of AngloGold Ashanti
Holdings plc. The outlook on all ratings remains positive.
"The affirmation of AngloGold Ashanti's Baa3 rating is based upon the
company's diversification of gold production outside of South Africa,
which only represents around 17% of group EBITDA adjusted for an
apportioned share of corporate costs", said Douglas Rowlings,
a Moody's Analyst. "At the same time cash flows generated from
its very free cash flow generative international operations are held predominantly
offshore in US dollars in the Isle of Man (Aa1 negative) by AngloGold
Ashanti Holdings plc which is incorporated there", he added.
AGA's credit profile benefits from significant diversification of operating
risk through having 17 mines — more than the global peers rated
by Moody's — across 9 countries and three continents with
no single operation generating more than 13% of total gold production.
This stratification of production across a number of different operating
jurisdictions — some of which have low credit ratings — and
mines with no material concentration reduces the risk of any material
production disruption impact.
The positive outlook on the rating reflects our expectation that AGA will
continue to deleverage through increasing levels of EBITDA leading to
credit metrics strengthening.
Today's rating action on AGA follows the weakening of the South African
government's credit profile, in particular in the country's institutional,
economic and fiscal strength, along with slower structural reform
progress as captured by Moody's recent decision to downgrade South Africa's
government bond ratings to Baa3 from Baa2 with a negative outlook.
For further information, refer to the sovereign press release "
Moody's downgrades South Africa's rating to Baa3 and assigns negative
outlook " (https://www.moodys.com/research/-PR_367769).
A full list of affected ratings is provided towards the end of this press
release.
RATINGS RATIONALE
AGA's Baa3 issuer rating is supported by a seasoned management team
with a track record of conservative financial policies with a target to
keep reported net debt to EBITDA below 1.5x through the cycle (currently
1.49x at FYE2016). Similarly AGA has shown a proactive approach
to managing the company's liquidity profile and ensuring its continual
robustness. A long dated debt maturity profile with pre-emptive
liquidity and mine configuration management provide shock absorption for
unforeseen risks. This also allows the company time to take measures
to appropriately align operations to challenging conditions that mines
could face.
The company's business profile is supported by its scale of gold
production as the third largest producer globally with 3.628 moz
for Financial Year Ended (FYE) 31 December 2016. This business
profile further considers the group's overall competitive cost of
gold production of $986/oz for Financial Year Ended (FYE) 31 December
2016 which is commensurate with comparably rated peers. AGA has
provided a guidance of $1,050-$1,100/oz
for its all-in sustaining cost for the FYE 2017. AGA further
benefits from having the lowest debt to reserves of $43/oz when
compared to similarly rated peers. AGA's credit profile also benefits
from a greater exposure to local operating cost when compared to similarly
rated peers. This to some extent protects against lower gold prices
where a depreciation in its basket of local operating currencies has been
shown to follow a fall in US dollar gold prices.
The ratings also factor 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 in a number of the countries in which it operates.
This is counterbalanced by the proactively engaged management team's record
of successfully navigating challenges and its signing of mining stability
agreements with countries where AGA has mining operations.
The rating positioning also recognises that AGA is primarily a single
commodity producer, as well as the inherent volatility in the gold
price, given the fully unhedged position of the company.
RATIONALE FOR POSITIVE OUTLOOK
The positive outlook considers a continual strengthening of credit metrics
over the next 18 months, which we believe could trend towards metrics
that are commensurate with a Baa2 rated gold mining company.
WHAT COULD MOVE THE RATING UP/DOWN
Upward rating pressure could occur if AGA's (1) gross debt/EBITDA is sustainably
less than 2.0x under Moody's forecast assumptions; (2) cash
flow from operations minus dividends/gross debt exceeds 30% on
a sustainable basis; (3) AGA is able to sustainably generate positive
free cash flow; and (4) liquidity is robust.
Upward movement of the rating will assess the ability for the company
to execute on long term capital projects while keeping gross debt/EBITDA
below 2x with liquidity headroom assuming Moody's medium gold price range
of $1,300-$1,100 per ounce.
Downward pressure on AGA's rating would likely arise due to heightened
operating risks in any of its operating assets that leads to a material
deterioration in operating performance being sustained. 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) gross debt/EBITDA
exceeds 3x; (2) cash flow from operations minus dividends/gross debt
falls below 20%; or (3) its liquidity profile weakens materially.
List of affected ratings:
Affirmations:
..Issuer: AngloGold Ashanti Limited
.... LT Issuer Rating, Affirmed Baa3
..Issuer: AngloGold Ashanti Holdings plc
....Backed Senior Unsecured Regular Bond/Debenture,
Affirmed Baa3
Outlook Actions:
..Issuer: AngloGold Ashanti Limited
....Outlook, Remains Positive
..Issuer: AngloGold Ashanti Holdings plc
....Outlook, Remains Positive
The principal methodology used in these ratings was Global Mining Industry
published in August 2014. Please see the Rating Methodologies page
on www.moodys.com for a copy of this methodology.
The Local Market analyst for these ratings is Douglas Rowlings,
+971 (423) 795-43.
Headquartered in South Africa, AngloGold Ashanti Limited (AGA) is
a global gold mining company operating in 20 locations in 10 countries,
including two major exploration projects in progress . With estimated
production of 3.6-3.75 million ounces of gold from
continuing operations and revenues of $4.15 billion for
FYE2017, AGA ranks as the world's third largest gold producer.
In South Africa (27% of production as of FYE 2016), AGA has
four deep level operations and surface operations, while most of
its operations in other countries are open pit. The company is
listed on the New York, Johannesburg, Ghanaian and Australian
stock exchanges.
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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
Elena Nadtotchi
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
David G. Staples
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
