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\t\t<\/span><\/p>\n <\/span><\/p>\n \n \t\t\u00a9 Thomson Reuters 2012 All rights reserved<\/p>\n","protected":false},"excerpt":{"rendered":" Overview — We believe that country risk for South African gold miner AngloGold Ashanti Ltd. (AngloGold) has increased in light of continuing strike action in South Africa and the possible implications of increasing social tensions for the mining industry. — We recently lowered our foreign currency rating on South Africa to ‘BBB’ from ‘BBB+’ to […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","ngg_post_thumbnail":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[1],"tags":[830,2370,183],"class_list":{"0":"post-15687","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-south-africa","7":"tag-news","8":"tag-reuters","9":"tag-south-africa-2","10":"entry"},"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts\/15687","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/comments?post=15687"}],"version-history":[{"count":0,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts\/15687\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/media?parent=15687"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/categories?post=15687"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/tags?post=15687"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Overview\n -- We believe that country risk for South African gold miner AngloGold \nAshanti Ltd. (AngloGold) has increased in light of continuing strike\naction in South Africa and the possible implications of increasing social\ntensions for the mining industry.\n -- We recently lowered our foreign currency rating on South Africa to \n'BBB' from 'BBB+' to reflect the deterioration in the social and economic \nenvironment. The outlook remains negative.\n -- We are therefore placing on CreditWatch negative our 'BBB-' long-term \ncorporate credit and senior unsecured debt ratings on AngloGold.\n -- The CreditWatch placement reflects the possibility of us lowering the \nratings by one notch following our reassessment of AngloGold's business risk \nprofile in light of the increased country risk. \n\nRating Action\nOn Oct. 17, 2012, Standard Poor's Ratings Services placed on CreditWatch \nwith negative implications its 'BBB-' long-term corporate credit and senior \nunsecured debt ratings on South African gold miner AngloGold Ashanti Ltd. \n(AngloGold). \n\nIn addition, we raised our long-term South Africa national scale rating on \nAngloGold to 'zaAA-' from 'zaA'. We affirmed our short-term South Africa \nnational scale rating on AngloGold at 'zaA-1'. Finally, we placed our long- \nand short-term South Africa national scale ratings on AngloGold on CreditWatch \nnegative.\n\nRationale\nThe CreditWatch placement reflects an increase in country risk for AngloGold \nin light of continuing strike action in South Africa, and the possible \nimplications of increasing social tensions for the mining industry. Our \nlowering of our foreign currency ratings on South Africa to 'BBB' from 'BBB+' \non Oct. 12, 2012, reflected this deterioration in the social and economic \nenvironment. (See \"South Africa FC Long-Term Rating Lowered To 'BBB'; LC \nRatings Lowered To 'A-\/A-2'; Outlook Remains Negative,\" published on \nRatingsDirect on the Global Credit Portal.) \n\nThe CreditWatch placement also reflects a potential rise in the company's unit \ncash cost, which we already consider to be comparatively high. We see a risk \nthat AngloGold's cash costs could increase and its competitive position could \ndeteriorate in the event of wage increases, or general inflationary pressure, \nalthough the steep weakening of the South African rand currently offsets this \npressure. On average in 2011, AngloGold's unit cash cost was $728 per ounce of \ngold, compared with the industry average of $600-$650 per ounce. The unit cash \ncost in the second quarter of 2012 was $801 per ounce.\n\nWe are planning to reassess AngloGold's business risk profile in light of \nincreased country risk and the possible increase in the company's cash cost. \nAs a result, we could revise AngloGold's business risk profile downward to \n\"fair\" from \"satisfactory.\" The CreditWatch placement signals a 50% \nprobability that such a revision will trigger a one-notch downgrade of \nAngloGold to 'BB+'. We plan to meet with management to ascertain whether the \ncompany can reduce both its exposure to country risk and its cash cost.\n\nThe current strikes caused AngloGold to idle its South African gold mining \noperations on Sept. 25, 2012. AngloGold's South African operations contributed \n43% of EBITDA and 32% of gold production in 2011. At this stage, we do not \nhave any visibility on how long the strikes will last and, more importantly, \non the nature of any future agreements between AngloGold and the unions.\n\nWe view country risk for AngloGold as materially higher than for its North \nAmerican peers. Even if the company has a pipeline of important growth \nprojects, these are principally in non-OECD countries in continental Africa \n(such as the Democratic Republic of Congo). In our view, the current situation \nin South Africa could push AngloGold to move out of South Africa to operate in \ncountries that in our estimation have a higher level of risk, thereby further \nincreasing AngloGold's exposure to country risk. \n\nFinancially speaking, AngloGold has low leverage and we forecast that profits \nand cash flows will remain strong, supported by prevailing high gold prices in \nthe context of quantitative easing and global economic uncertainty. \n\nUnder our base-case scenario, which assumes more prudent gold prices than \ncurrent prices, we believe that AngloGold's funds from operations (FFO) to \ndebt will remain in the range of 30%-35% in 2013, a level that we consider \ncommensurate with an \"intermediate\" financial risk profile, before falling to \nless than 30% in 2014. Our base case includes EBITDA of $2.5 billion in 2012, \nunder the hypothetical assumption that the strike lasts until the end of the \nyear. This compares with EBITDA of $2.9 billion in 2011 and $1.5 billion in \nthe first half of 2012. We assume that EBITDA falls to $1.7 billion in 2013. \n\nAngloGold is undertaking a sizable capital expenditure (capex) plan, which we \nunderstand amounts to $2.0 billion-$2.5 billion per year. If unchanged, this \nwould translate into substantial negative free operating cash flow (FOCF) in \nthe coming years. Consequently, we do not exclude the possibility of \nAngloGold's Standard Poor's-adjusted debt surging to more than $3 billion in \nthe coming years, from $1.4 billion at the end of 2011. However, we recognize \nthat management may reduce growth spending--possibly to about $2.0 billion in \n2013 and $1.0 billion in 2014--in the event of lower gold prices.\n\nThe raising of the long-term South Africa national scale rating reflects our \nrecent adjustment to our mapping guidance for the South African national \ncredit rating scale.\n\nLiquidity\nWe assess AngloGold's liquidity as \"adequate\" under our criteria. We estimate \nthat the ratio of sources of liquidity to uses of liquidity will be \ncomfortably above 1.2x for the next 12 months and the 12 months thereafter. \nOur assessment reflects minor debt maturities until 2014 ($872 million of \nmandatory convertible bonds are to be fully converted in 2013); low pressure \nto pay dividends; and a long-term, fully unutilized, committed credit facility \nof $1 billion.\n\nAs of June 30, 2012, AngloGold had the following sizable liquidity sources:\n -- $1 billion of cash, excluding cash of $270 million that we consider as \ntied to operations; \n -- A $0.9 billion long-term, fully unutilized, committed revolving credit \nfacility (RCF) of $1 billion due July 2017 (replacing a previous RCF maturing \nin April 2014);\n -- A $550 million unsecured four-year RCF linked to the Tropicana gold \nproject in Australia;\n -- An additional $750 million of proceeds following issuance of senior \nunsecured notes in July 2012; and\n -- Cash flow from operations under our base case of about $2.1 billion by \nDecember 2013 and $1.1 billion in 2014. \n\nWe project the following uses of liquidity as of June 30, 2012:\n -- Capex of about $2.0 billion-$2.5 billion per year in capex to execute \ncurrent projects. Management could reduce this spending by about $1.0 \nbillion-$1.5 billion in 2013 and 2014 if need be;\n -- $750 million of convertible bonds maturing in May 2014;\n -- A payment of $335 million to complete the acquisition of Mine Waste \nSolutions; and\n -- $0.2 billion of dividends per year, but we believe the company could \nreduce these if need be.\n\nCreditWatch \nWe aim to resolve the CreditWatch placement by the end of December, after \nmeeting with management and gaining further insight into the company's ability \nto reduce its exposure to country risk or better manage its cash cost. We \ncould downgrade AngloGold by one notch to 'BB+' if we reassess AngloGold's \nbusiness risk profile to \"fair\" from \"satisfactory.\"\n\nRelated Criteria And Research\nAll articles listed below are available on RatingsDirect on the Global Credit \nPortal, unless otherwise stated.\n -- Methodology: Business Risk\/Financial Risk Matrix Expanded, Sept. 18, \n2012\n -- Key Credit Factors: Methodology And Assumptions On Risks In The Mining \nIndustry, June 23, 2009\n -- Standard Poor's Revises Mapping Guidance For South Africa National \nCredit Rating Scale Following Sovereign Downgrade, Oct. 15, 2012\n -- South Africa FC Long-Term Rating Lowered To 'BBB'; LC Ratings Lowered \nTo 'A-\/A-2'; Outlook Remains Negative, Oct. 12, 2012\n -- High Prices Mask A Difficult Future For Gold Miners, Sept. 11, 2012\n -- Standard Poor's Revises Its Metals Price Assumptions For 2012, 2013, \nAnd Beyond, Jan. 16, 2012\n\n\nRatings List\nRatings Affirmed; CreditWatch\/Outlook Action\n To From\nAngloGold Ashanti Ltd.\n Corporate Credit Rating BBB-\/Watch Neg\/-- BBB-\/Stable\/--\n\nAngloGold Ashanti Holdings PLC\n Senior Unsecured Debt* BBB-\/Watch Neg BBB-\n\nUpgraded; CreditWatch\/Outlook Action; Ratings Affirmed\n To From\nAngloGold Ashanti Ltd.\n Corporate Credit Rating\n South African National Scale zaAA-\/Watch Neg\/zaA-1 zaA\/--\/zaA-1\n\n*Guaranteed by AngloGold Ashanti Ltd.\n\n\nComplete ratings information is available to subscribers of RatingsDirect on \nthe Global Credit Portal at www.globalcreditportal.com. All ratings affected \nby this rating action can be found on Standard Poor's public Web site at \nwww.standardandpoors.com. Use the Ratings search box located in the left \ncolumn.<\/pre>\n