AngloGold Ashanti: move to US brings no quick valuation uplift

South Africa’s gold rush began in the late 19th century. Another one has begun, this time in New York City. Enterprises outside America now seek out the deep veins of capital via the New York Stock Exchange. AngloGold Ashanti on Friday announced plans to move its primary listing to New York from Johannesburg. As with some British companies leaving their home market, it sees the potential for higher valuation over time.

A London listing was a possibility. As its name implies, AngloGold has long ties to the UK via its holding company subsidiary. Indeed, the holding company will redomicile in the UK. Moving that to the US would incur the threat of a dividend withholding tax. The South African miner has also snubbed London because two-thirds of its share trading already occurs in the US via a depository receipt.

But achieving a higher earnings multiple would not happen right away. A year ago, AngloGold and its local peer Goldfields traded just over five times their forward ebitda, 40 per cent below that of North America’s largest miners Barrick and Newmont. But since then those four multiples have converged around seven times.

A recent bull run in the gold price favours AngloGold and Goldfields. Both have the highest share three-year price sensitivity to the commodity among 17 large gold miners reviewed by Raj Ray at BMO Capital Markets. AngloGold argues that the discount would return once gold prices moderate.

Index inclusion matters too. AngloGold is a large part of the popular US Van Eyck Gold ETF. How much more passive inflows it would receive is not clear. Had it chosen London its near £9bn market value would have meant FTSE 100 inclusion, along with miners Fresnillo and Endeavour Mining. Finally there is the cost, estimated at 5 per cent of market capitalisation — some $560mn today.

That could have bought a new greenfield gold mine project, thinks BMO. Something for shareholders to ponder — three-quarters must approve — when they vote on its restructuring.