AS part of its $3.1billion debt reduction strategy and to lower interest payments, gold miner AngloGold Ashanti is offering to buy backup to $810 million in the aggregate principal amount of its outstanding 8.5 per cent high-yield bonds, maturing in 2020.
The company would use cash on hand, following the $820 million cash sale of the Cripple Creek & Victor (CC&V) mine, in Colorado, in the US, to Newmont Mining Corporation earlier this month, and borrowings under existing credit facilities, if needed, to buy back the bonds.
“This is another decisive step forward in our strategy of cutting debt and reducing our interest bill to improve free cash flow.
“Our aim remains to sustainably improve cash flow through operational improvements and lowering interest costs, while maintaining sufficient liquidity,” Chief Financial Officer Christine Ramon said.
AngloGold Ashanti has responded to lower gold prices by cutting overhead expenditure by more than two-thirds since the end of 2012, while lowering all-in sustaining costs by about one-quarter over the same period.
In addition, the group introduced two new, low-cost mines, closed higher-cost assets, removed unprofitable ounces from its portfolio and sold CC&V to reduce net debt.
It was now intensifying efficiency efforts to complement cost benefits from weakening local currencies and falling oil prices.
Assuming the offer was fully taken up, AngloGold Ashanti’s yearly cash interest expense would decrease by about $69 million, to $170 million.
The company would continue to have significant sources of liquidity, including undrawn headroom in its various revolving credit facilities, of about $1.1 billion, and cash of $400 million.
These would be used to weather gold price volatility and unforeseen interruptions in production if required.