[miningmx.com] – ANGLOGOLD Ashanti has agreed to sell its US gold mine Cripple Creek & Victor (CC&V) to Newmont Mining for $820m in a deal that would enable the South African firm to make serious in-roads in its debt reduction plans.
The transaction includes an uncapped 2.5% royalty on net revenue generated from future underground production estimated by Macquarie Research at worth between $50m and $60m over the remaining life of mine. AngloGold will also be released from $200m in capital expenditure required to complete the CC&V Extension 2 project.
CC&V produced 211,000 ounces of gold in 2014. The group said it wanted to cut net debt from its current level of $3.1bn. Reuters said on June 2 that AngloGold was seeking $1bn for the mine.
Macquarie said the priority for AngloGold will be to repurchase a $1.25bn bond issued July 2013 that carries an 8.5% coupon. The bonds mature in July 2020 but may be redeemed from July 2016.
“After a competitive bidding process, we’re pleased to have arrived at a transaction that recognizes the value of this asset,’ said Srinivasan Venkatakrishnan, CEO of AngloGold. “This deal significantly de-risks the balance sheet without diluting our shareholders, and places us in a much stronger position,” he said.
Completion of the transaction was planned for the beginning of August 2015, AngloGold said. A conference call with South African journalists is scheduled for 8am, June 9.
“We view the announcement as positive and a significant step in the right direction to deleveraging the company’s balance sheet,” said Macquarie Research.
Venkatakrishnan said in February that there was “intense competition” among potential buyers for assets the company wanted to sell.
AngloGold said last year it would consider bids for La Colosa, its Colombian property, as well as mines in West Africa such as Iduapriem and Obuasi, the latter currently the focus of a $209m downsizing and restructuring programme.
“We expect the asset disposal to be a positive catalyst for the stock, reducing investor concerns of a potential capital raise, allowing investors instead to focus on the discounted nature of the portfolio and the free cashflow potential of the asset base should the company be able to stem negative free cashflow at Obuasi and/or Colombia,” said Andrew Byrne, an analyst for Barclays in a morning note.
Newmont said on June 8 it would issue 29 million shares in order to raise funds to complete the purchase of CC&V. An additional 4.35 million shares would be granted to the underwriters of the offer for a 30-day option period.
Citigroup Global Markets, J.P. Morgan, and HSBC Securities will act as joint book-running managers for the offering, the gold producer said.
