Anglo American plc should exit AngloGold Ashanti “quickly and completely” by taking the demerger route, AngloGold Ashanti CEO Bobby Godsell urged on Thursday.

In answer to a question put to him by JP Morgan gold analyst Steve Shepherd, Godsell said that there were three modes of exit open to Anglo American, which held 41,8% of the shares of AngloGold Ashanti.

One option, Godsell said, would be for Anglo American to sell its AngloGold Ashanti shares into the market; another would be through merger-and-acquisition activity that offered an opportunity either to dilute or to exchange one asset price for another asset price; and a third was a demerger of the shares by the payment of a dividend in specie. Godsell said that he believed the third demerger option was the one that would be in the best interests of AngloGold Ashanti.

“All three of those options remain open, but I think a quick-and-complete exit would be in our best interests and a demerger is the simplest example of such an exit,” Godsell said.

He said it was his job as AngloGold Ashanti CEO to try to find ways for Anglo American to exit in a manner that made value sense for Anglo American and also left AngloGold Ashanti best positioned to grow and compete in the gold industry.

“And that is exactly what we are doing,” he said.

Asked by Mining Weekly Online to elaborate on the demerger as a mode of exit, Godsell said that a demerger would involve Anglo American paying out the AngloGold Ashanti shares it held as a dividend in specie to Anglo American shareholders.

“It’s exactly like an unbundling,” he said.

Shepherd had made the point that the manner in which Anglo American disposed of its shares in AngloGold Ashanti was “very germane to the value of the AngloGoldAshanti share price”.

He had earlier complained that Anglo American had used a venue to which “we were not privy” to put a “two-to-three year” timeframe on the disposal of its AngloGold Ashanti shareholding.

Godsell replied that the “two-to-three-year” timeframe had been made at an investment conference in the US, a public forum, and that the remark had been recorded in analysts’ notes, and was therefore in the public domain.

He did concede, however, that prior to that, Anglo American had stated that it wanted to continue to be a significant shareholder in AngloGoldAshanti “for the foreseeable future”.

In the circumstances, Godsell said it could now be supposed that that “foreseeable future” had become the “next two-to-three years”.

Credit Suisse Standard Securities gold analyst David Davis interpreted the demerger as granting Anglo American shareholders the right to the AngloGold Ashanti shares, which they would then be entitled to hold or sell. Shepherd complained to Mining Weekly Online, however, that the demerging option would create a “huge turmoil” in the market for a few months and “a lot of pain” for a short while, because many Anglo American shareholders could not own AngloGold Ashanti shares because they did not track the required index.

Nedcor Securities analyst Des Kilalea believed the largest Anglo American shareholder in the UK to be Standard Life, which, he said, did not have a mandate to hold AngloGold shares and would thus have to sell them off, which could impact negatively on share value.

Anglo South Africa Capital, a wholly owned subsidiary of Anglo American, said earlier this year that it had completed the sale of 19 685 170 shares of AngloGold Ashanti, including 3 356 857 ordinary shares that were the subject of an over-allotment option granted to the underwriters.

AngloGold Ashanti also completed the sale of 9 970 732 ordinary shares.

As a result of these transactions, Anglo American’s percentage interest in AngloGold Ashanti had been reduced to 41,8%.

At that point, a London analyst complained that shareholder value could be lost in Anglo American’s relinquishing of its control of AngloGold Ashanti.

Warning that the Anglo American decision was “inconsistent with maximising value for shareholders”, the analyst pointed out during question time that there were two recent examples of the control of precious-metal companies being of substantial value to shareholders.

The first was Placer Dome’s share price rising 50% on the Barrick approach and the second being Lonmin’s share price rising 25% on takeover talk.

Both, the analyst said, suggested that control of precious-metal companies had substantial value, which Anglo American was now standing to lose.

He leveraged his comments on Anglo American CEO Tony Trahar’s saying earlier that Anglo American was positive on the fundamentals for gold, which presumably meant that he believed that the gold price would rise over time.

Against that background, the analyst harangued that the plan of Anglo American to relinquish its control of AngloGoldAshanti was, “in the short term, therefore, inconsistent with maximising value for shareholders”.

Trahar replied that, in the short term, it might be seen as such, but that the Anglo American decision was influencing long-term strategy.

Trahar said shareholders had for long commented that it was inconsistent to have a very differently-rated gold stock in a diversified mining portfolio.

Shareholders had suggested that Anglo American could capture some of that rating in relinquishing control and reducing the size of its shareholding in AngloGold Ashanti. It was also the desire of Anglo-Gold Ashanti itself to be able to issue shares in competition against other gold companies in order to compete in the gold sector, but that its status as a subsidiary was a constraint.

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