AngloGold to Resume Dividend as Gold Price Aids Profit Swing

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  • Free cash flow almost doubled to $278 million in 2016
  • Miner last paid dividend in 2013 amid gold price plunge

AngloGold Ashanti Ltd., the world’s third-largest gold producer, will pay a dividend for the first time in three years after the price of the metal increased and currencies weakened in the countries where it operates.

Headline earnings, which exclude one-time items, were $111 million for 2016 compared with a loss of $73 million a year earlier, the Johannesburg-based company said in a statement Tuesday. Free cash flow almost doubled to $278 million.

The decision to declare a dividend was made based on “free cash flow, capital discipline and confidence in the business,” Chief Executive Officer Srinivasan Venkatakrishnan said on a call with reporters. In the future, the company will pay out 10 percent of free cash flow before capital spending on growth.

The miner’s average received gold price rose 7.9 percent to $1,249 an ounce in 2016 and it also benefited from the depreciation of currencies in South Africa, Argentina and Brazil relative to the U.S. dollar. AngloGold pays most expenses in local currencies while gold is sold for dollars. Net debt was $1.92 billion at the end of the year, or 1.24 times earnings, compared with $2.2 billion at the end of 2015.

The company said it expects to produce 3.6 million to 3.75 million ounces of gold this year at all-in sustaining costs of $1,050 to $1,100 an ounce. Gold declined 0.3 percent to 1,234.64 an ounce at 8:48 a.m. in Johannesburg.

After almost four years of focusing on debt reduction, AngloGold is tentatively exploring ways of replenishing its reserves by investing in projects near its existing mines in Brazil, Australia and central Africa. Unlike counterparts at African peers Sibanye Gold Ltd., Harmony Gold Mining Co. and Acacia Mining Plc, Venkatakrishnan has said he’s not interested in acquisitions, because they’re too risky.

“The industry is coming to a point where companies either need to do M&A or reinvest to shore up their portfolios,” Venkatakrishnan said. “We are certainly in the reinvestment camp.”

AngloGold lost 104,000 ounces of gold production because of safety stoppages in South Africa in 2016. The company won a court ruling against the Department of Mineral Resources last year that stated the government was heavy-handed in its approach to implementing stoppage orders. The situation has so far improved in 2017, Venkatakrishnan said, noting the company has had no fatalities at its mines since the third quarter of last year.