AngloGold Ashanti Ltd., the third-biggest gold producer, had a proposal to split its South African assets from mines elsewhere rebuffed by the country’s government, three people familiar with the matter said.
The plan was suggested to the government by the Johannesburg-based company after shareholders including John Paulson, the billionaire whose hedge fund is the largest investor in AngloGold, said the reorganization would boost the value of its stock, the people said, declining to be identified because the company hasn’t commented publicly on the issue. The company’s shares fell 3.1 percent to 194.49 rand by the close in Johannesburg, the lowest since November 2008.
A transfer of AngloGold assets to a new company “may well require the minister of mineral resources’ consent,” Peter Leon, head of Africa mining and energy projects at law firm Webber Wentzel in Johannesburg, said in an e-mailed response to questions. “Some other mining companies have tried, but not succeeded, in obtaining the National Treasury’s consent for the re-domiciliation of their non-South African assets.”
Paulson has estimated that spinning off the South African mines, which accounted for about a third of the company’s $6.4 billion revenue in 2012, could boost the combined value of the stock by as much as 68 percent. AngloGold’s South African mines, among the world’s deepest, are constrained by power shortages. Last year, the worst mining industry violence since the end of apartheid shut its operations for a month, resulting in higher wages.
South Africa’s government has been critical of companies such as Anglo American Plc that have moved their headquarters and main listings abroad, saying that investment in the country has been cut and jobs lost.
The government doesn’t comment on specific applications, Ismail Momoniat, a deputy director-general in the National Treasury, said by phone from Durban today. Trevor Hattingh, a spokesman for the Department of Mineral Resources, didn’t immediately respond to an e-mailed query.
AngloGold shares have declined 27 percent over the last year, the third-worst performance on an index of six gold companies traded in the city.
Stewart Bailey, a New York-based spokesman for AngloGold, declined to comment.
The company was founded in 1998 when Anglo American, then based in Johannesburg, combined its gold assets into one entity. AngloGold today owns 20 operations in 10 countries on four continents, according to its website. Most of its expansion plans are outside South Africa.
The gold producer has previously said it’s considered splitting its assets. In February 2011 former Chief Executive Officer Mark Cutifani said in an interview that a split was being debated to boost the value of the company’s shares. In February this year, he said that while a split was viable, it may not be the company’s best option.
AngloGold’s biggest South African rival, Gold Fields Ltd., another mining company in which Paulson has invested, separated most of its domestic assets last month into Sibanye Gold Ltd. while keeping development projects in Gold Fields. It announced the plan in November.
The company has since been criticized by the ruling African National Congress and labor unions for planning to cut jobs in South Africa.
“I do not think it would be politically correct for AngloGold to split,” David Davis, a mining analyst at SBG Securities in Johannesburg, said by e-mail. “The government would not be happy.”