AngloGold blinks in Normandy war but has options

Johannesburg: Anglogold Ltd looked set to suffer a blow to its expansion strategy on Thursday after refusing to up its offer again for Australia’s Normandy Mining, but analysts say it has other options. AngloGold’s chances of winning Australia’s biggest gold miner dived after Newmont Mining hiked its bid for Normandy in a move to knock out its South African rival.

“If AngloGold doesn’t get Normandy it obviously puts back their strategy, but they will be out there looking for other mines,” said SCMB Securities analyst David Davis.

Analysts said its options included vying for mines in the rest of Africa, a tie-up with rival South African producer Gold Fields Ltd, and more cooperation with Canadian gold giant Barrick Gold Corp.

With the global gold mining industry undergoing a wave of consolidation to drive down production costs amid sluggish bullion prices, Normandy and its annual two million ounces of output is a much sought-after prize.

Australia is seeing a rapid consolidation of its industry, with international suitors eyeing the country’s skilled workforce, political stability, and a weak Australian dollar making local firms cheaper to acquire.

AngloGold has been selling off its less profitable mines in South Africa, which produces about half the company’s seven million ounces of annual output, and acquiring low-cost assets in the rest of Africa, the Americas and Australia.

AngloGold launched its bid for Normandy late last year, arguing that it would make an excellent strategic fit. But after sweetening its offer again last month, AngloGold chairman and CEO Bobby Godsell said he would not overpay and vowed to seek other acquisitions if Normandy slipped through his fingers.

It was reported in November that AngloGold was in talks about increasing its stake in the Morila gold mine in Mali. AngloGold already owns 40 per cent of the mine in a joint venture with Randgold Resources.

A failed Normandy bid would also likely revive talk of a tie-up between AngloGold and Gold Fields Ltd, South Africa’s second largest gold miner. Gold Fields would add to AngloGold’s South African exposure, but it would boost the company’s presence in West Africa and Australia where Gold Fields has operations.

Gold Fields last month completed its $232 million acquisition of the St Ives and Agnew gold mines in Australia from WMC Resources
Ltd.

Analysts also see a potential deal with Barrick after AngloGold announced a proposed alliance in Australia and Tanzania last month that could see greater cooperation between the two gold giants.

— Reuters