Asset manager Allan Gray believes AngloGold Ashanti is poised to capture more market share as the company goes from strength to strength in its drive to close the valuation gap with international competitors.
According to a recent note, the gold mining company continues to present an attractive investment case even after its market value has nearly tripled this year.
The asset manager listed the company, which it believes is still undervalued, as a “high-conviction” gold stock, suggesting that it strongly expects AngloGold to outperform the market in future.
Allan Gray investment analyst Umar-Farooq Kagee cited the miner’s “attractive” 13% spot free cash flow yield — a measure of the money left over after a company covers its capital spending, relative to its market value — and 6.5% spot dividend yield, “making it attractive to investors”.
Thanks to US tariffs and ongoing conflict in the Middle East and Ukraine, gold’s unprecedented popularity among central banks and investors has grown AngloGold’s share price nearly six-fold in the past three years.
This price rally has helped the company close its valuation gap with North American peers like Barrick Gold and Newmont — one of the key ambitions set out by CEO Alberto Calderon when he took the helm in 2021.
The drive for offshore expansion as a tool for valuation parity had already begun a year before Calderon’s appointment, when AngloGold sold off its last remaining SA mine to Harmony Gold. Then, in 2023, the miner moved its headquarters and primary listing to the US, unlocking a larger investor base with considerably deeper pockets.
“Under the leadership of Calderon, the company has done well relative to its peer group on maximising value. He made it clear from the onset of his tenure in 2021: fix the underperforming assets or get rid of them,” said Kagee.
Calderon’s tenure has seen AngloGold executing an array of deals aimed at prioritising its core assets in the US while getting rid of smaller, high-cost mines.
As part of the CEO’s strategic efforts, AngloGold in June sold its stake in Brazilian gold mine Mineração Serra Grande (MSG), one of its higher cost and smallest operations by production.
Less than a month prior, the miner agreed to divest its stakes in two gold projects in Ivory Coast to Australian-listed Resolute Mining in a deal valued at up to $185m.
Another boon for the group was its acquisition of Centamin, Egypt’s largest gold mine, for $2.48bn in November. The mine added 117,000oz to the company’s latest first quarter production, resulting in a 28% rise in gold production year on year.
In recent months, Calderon has boasted of the company’s progress in closing its valuation gap since his appointment. Financial Mail reported that AngloGold was trading on par with Newmont and Barrick Mining after the release of its second quarter results, while analysis by RMB Morgan Stanley at the time pointed to a far narrower discount between AngloGold and its peers.
AngloGold’s results for the first half show that the company is ready to pursue more growth initiatives as rising gold prices continue to free up capital. The miner’s net debt fell a striking 92% to $92m at end-June, even after paying out $406m in interim dividends.
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