[miningmx.com] – THE flight from gold amid expectations of rising rates and a stronger dollar have to some extent masked the impact of AngloGold Ashanti’s aborted rights issue and de-merger strategy on the gold firm’s share price.
The share was already under pressure from September 1 losing about 7% over seven days as the dollar gold price sank – now down to its lowest levels for the calendar year . On September 9, however, it shed 15% as investors took a dim view of the $2.1bn rights issue proposal.
It regained ground by September 15 when the de-merger was formally rejected by management, but has since fallen another 4% as the pressure on it and all other South African gold stocks has intensified.
Not even Harmony Gold or Sibanye Gold, which have seen the rand gold price strengthen whilst the dollar gold price has fallen 6% this month, have been immune from the selling.
“I don’t anyone thinks the gold sector has been over-bought, there is just negativity about the outlook with most people expecting a stronger dollar, with rising interest rates but with no real inflationary pressures,” an analyst said. “Investors are obviously concerned about cash flows and future impairments. And there are quite a lot of redemptions from funds,” he said.
It’s in this environment that AngloGold must set about piecing together its new ‘old’ strategy, reducing costs (where possible but which must be increasingly difficult) and selling assets to relieve pressure on the balance sheet.
For CEO, Srinivasan Venkatakrishnan, this must be a particularly trying time. One US fund manager said it was not beholden on Venkatakrishan to win back some lost prestige following the rejected demerger.
“Venkat had an excellent reputation that now will require fixing,” he said. The demerger proposal was, in his view, a “value neutral event” although the conditions foisted on AngloGold by the South African Reserve Bank will only increase the perception that the country is not investment friendly.
Asked in an interview whether he viewed it as a knock to credibility, Venkatakrishnan acknowledged the impact. “It’s a setback. We were thinking 10 years ahead, but it’s also not a do-or-die”.
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