Executive Summary / Key Takeaways

• Strategic Transformation Yields Strong Results: AngloGold Ashanti has undergone a significant strategic reset since late 2021, focusing on cost competitiveness, portfolio optimization, and operational discipline. This transformation has led to a 4% reduction in real cash costs by H1 2024, a 65% increase in H1 2024 EBITDA to $1.12 billion, and a remarkable swing to $206 million in free cash flow from a $205 million outflow in the prior year period.
• Nevada Emerges as a Game-Changer: The company's exploration success in Southern Nevada, particularly the 9.1 million ounce Merlin discovery, is poised to be a multi-decade gold district with potential for 500,000 ounces of annual production at Tier-1 costs. The North Bullfrog project, with an expected all-in sustaining cost of $854 per ounce, is slated for first production around mid-2026.
• Operational Excellence and Technological Edge: AngloGold Ashanti's "Full Asset Potential" (FAP) program and adoption of advanced mining methods like the V30 reamer and underhand cut and fill are driving productivity gains and cost efficiencies across its global portfolio, providing resilience against inflation and operational disruptions.
• Robust Financial Health and Shareholder Returns: With strong liquidity, low leverage of 0.6 times, and anticipated free cash flow doubling in H2 2024, the company is well-positioned to fund its growth pipeline and deliver consistent shareholder returns, as evidenced by its interim dividend of $0.22 per share.
• Competitive Standing and Future Growth: AngloGold Ashanti is distinguishing itself in the gold sector through superior cost management and a high-quality asset base, aiming to close the valuation gap with larger peers. Its strategic divestitures and focus on core, high-potential assets underscore a clear path for sustainable growth and enhanced profitability.

A Strategic Rebirth: Forging a New Path in Global Gold Mining

AngloGold Ashanti plc, incorporated in 1944, has long been a significant player in global gold mining, with operations spanning Africa, Australia, and the Americas. The company's core business involves the exploration and production of gold, alongside by-products such as silver and sulfuric acid. However, a pivotal strategic shift initiated in late 2021 under new senior leadership marked a decisive turn in its trajectory. This transformation was driven by a clear mandate: to regain cost competitiveness and close the valuation gap with its industry peers, a gap that had widened as the company found itself at the higher end of the industry cost curve. This strategic reset involved a comprehensive "full potential program" and a significant corporate restructuring, culminating in a move of its primary listing to the New York Stock Exchange to tap into deeper capital pools.

The global gold market currently presents a dynamic backdrop for miners. Gold prices have seen a strong rally, increasing by 14% in the first half of 2024, outpacing most major asset classes. This surge is fueled by a confluence of factors, including robust demand from central banks, healthy investment flows from Asia, and heightened geopolitical uncertainty, even amidst elevated U.S. interest rates. Analysts are increasingly bullish, with some forecasting gold prices potentially reaching $4,000 per ounce, driven by concerns over U.S. debt and a depreciating U.S. dollar. This environment creates a compelling opportunity for efficient gold producers to capitalize on higher margins.

In this competitive landscape, AngloGold Ashanti is strategically positioning itself to excel. The company's focus on operational discipline and cost management is a key differentiator. It has demonstrated a superior ability to manage costs, reporting a 4% reduction in real cash costs by H1 2024, while its peer group experienced an average 16% increase over the same period since mid-2021. This performance is critical in an inflationary environment, where the company faced a realized inflation rate of approximately 6% in H1 2024. AngloGold Ashanti is actively engaging with credit rating agencies to highlight these improving fundamentals, even as these agencies remain cautious about the gold price environment and the jurisdictional profile of mining assets.

Technological Edge and Operational Resilience

AngloGold Ashanti's commitment to operational excellence is deeply intertwined with its adoption and development of differentiated technologies and strategic programs. The "Full Asset Potential" (FAP) program stands as a cornerstone of this strategy, designed to systematically improve business fundamentals, drive productivity, and manage costs across both Tier-1 and Tier-2 assets. This program has proven instrumental in offsetting inflationary pressures and providing resilience against production interruptions, contributing significantly to the company's financial performance. For instance, the FAP program contributed an incremental EBITDA of $250 million in 2023, adjusted for uncontrollable economic factors.

In its underground operations, AngloGold Ashanti is deploying advanced mining methods to enhance safety and extraction efficiency. At Obuasi, the introduction of the V30 reamer, significantly larger than previous equipment at 750 millimeters compared to 250 millimeters, is proving effective in establishing new stopes more efficiently and safely increasing mining rates. This technological enhancement is crucial for navigating challenging ground conditions in high-grade areas. Furthermore, the trial of the underhand drift and fill mining method at Obuasi has progressed as planned, proving the concept with good paste strength and a 14-day curing time. This method is particularly suited for difficult ground conditions in high-grade areas and is expected to yield a $50 per ounce improvement at steady state compared to conventional sub-level open stoping, primarily due to significantly better extraction efficiency and reduced dilution.

The company is also making low-capital expenditure modifications to plants, such as at Siguiri, to optimize metallurgical recoveries by focusing on carbon management and oxygen levels. This targeted approach allows for improved plant performance even when processing challenging ore types. These technological advancements and operational programs are not merely incremental improvements; they form a critical competitive moat. By enhancing efficiency, reducing costs, and improving safety, they directly contribute to AngloGold Ashanti's financial performance, strengthen its market positioning, and underpin its long-term growth strategy, particularly in an industry where operational consistency and cost control are paramount.

Financial Resurgence: A Story of Discipline and Growth

AngloGold Ashanti's strategic transformation has translated into a compelling financial resurgence, particularly evident in its first-half 2024 results. The company reported a 2% year-on-year increase in production, significantly bolstered by a 12% jump in Q2 production over Q1, driven by strong recoveries in Australia and Siguiri. This operational momentum, coupled with rigorous cost management, enabled AngloGold Ashanti to be the only gold major to report a 1% year-on-year reduction in cash costs for H1 2024, effectively capturing the benefits of a stronger gold price environment.

The financial impact of these efforts is striking. Revenue climbed by over $400 million year-on-year, flowing directly to the bottom line. Adjusted EBITDA surged by 65% to $1.12 billion, and free cash flow experienced a dramatic turnaround, shifting from an outflow of $205 million in H1 2023 to a robust inflow of $206 million in H1 2024. Headline earnings mirrored this success, increasing over 400% to $313 million (US$0.74 per share) in H1 2024, compared to $61 million (US$0.41 per share) in the prior year period. Total capital expenditure increased by 11%, aligning with internal plans to support ongoing operations and growth initiatives.

The company's balance sheet remains robust, characterized by strong liquidity and low gearing. With approximately $2.3 billion in cash on hand and undrawn facilities, AngloGold Ashanti maintains significant financial flexibility.

Its leverage stands at a healthy 0.6 times, well within its target range, even as it continues to invest in its operating assets and growth pipeline. This strong financial position, coupled with confidence in its ongoing performance, led to the declaration of an interim dividend of $0.22 per share, representing a 27% payout ratio and signaling a commitment to enhanced shareholder returns. The company anticipates free cash flow to more than double H1 levels in the second half of 2024, further strengthening its financial outlook.

Portfolio Optimization and Growth Catalysts

AngloGold Ashanti's portfolio is strategically segmented into Tier 1 assets and Tier 2 mines, each playing a distinct role in its growth narrative. Tier 1 assets, including Geita, Kibali, Obuasi, Tropicana, and Iduapriem, are characterized by their scale, long life, and potential for significant production and margin growth. Geita, for instance, saw a 16% year-on-year production increase in Q1 2024 and is on track for 500,000 ounces in 2023, with its underground operations at Nyankanga exceeding full asset potential targets by 29%. Obuasi, a cornerstone asset, is projected to reach between 275,000 and 320,000 ounces in 2024, with a clear ramp-up plan targeting over 400,000 ounces by 2026, driven by access to high-grade Block 10 (averaging 8 g/t) and Block 11 (averaging 17 g/t) through critical ventilation infrastructure expected by Q2 2025.

The Tier 2 mines, such as Cuiabá, Serra Grande, Siguiri, and Sunrise Dam, provide steady performance and predictable cash contributions. Brazil's operations, particularly Cuiabá, have undergone an "extraordinary turnaround" under new leadership, transforming from a $140 million free cash outflow in H1 2023 to a $53 million inflow in H1 2024. This was achieved despite a $200 per ounce discount on Cuiabá concentrate, with plans to restart the Queiroz plant in H2 2024 to recapture full margins. Siguiri has also seen a significant recovery, with metallurgical recoveries stabilizing at 87% in Q2 2024, up from the low 70s in Q1, and a 38% increase in tons processed.

The most significant growth catalyst for AngloGold Ashanti lies in its Nevada project, described as a "game-changer" with the potential to become a multi-decade gold district producing as many as 500,000 ounces annually at Tier-1 costs. The Merlin deposit, a 9.1 million ounce Inferred Mineral Resource, represents the largest greenfield gold discovery in the U.S. in over a decade, boasting high-grade intercepts like 144 meters at 10.53 g/t. The North Bullfrog project, a starter project, has a declared mineral reserve of 1 million ounces and is expected to commence production around mid-2026 with an all-in sustaining cost of approximately $854 per ounce. The company is also progressing the Sterling project, an early-stage initiative targeting 200,000 ounces at an all-in sustaining cost of $870 per ounce by 2028.

Outlook and Risks: Charting the Path Ahead

AngloGold Ashanti's outlook for the remainder of 2024 and beyond is marked by confidence in its strategic direction and operational capabilities. The company maintains its unchanged 2024 guidance, anticipating approximately 4% production growth at the midpoint. Cash costs per ounce are projected to remain flat at the midpoint, with the benefits of the FAP program offsetting inflationary pressures and a stronger Australian dollar. Sustaining capital expenditure is expected to increase slightly due to investments in reserve development, while growth capital expenditure will rise to support the Nevada projects. Management anticipates free cash flow to more than double H1 2024 levels in the second half of the year, assuming stable gold prices.

Despite this positive trajectory, several risks warrant careful consideration. Safety remains a paramount concern, as tragically highlighted by a fatality at Geita in May 2024, underscoring the continuous need for vigilance and robust controls against high-consequence, low-frequency events. Operational disruptions, such as the "biblical flooding" in Australia in March 2024 and equipment availability issues at Siguiri, can impact production and require significant recovery efforts. Metallurgical challenges, like those encountered with carbonaceous ore at Siguiri, necessitate ongoing technical solutions and flexible ore sourcing. Furthermore, Obuasi's ramp-up faces inherent volatility due to ground conditions and grade fluctuations in mature mining blocks.

Financial risks include persistent inflationary pressures, with a realized rate of about 6% in H1 2024, particularly in labor costs. The company's hedging strategy, while providing downside protection, resulted in a $23 million realized loss in H1 2024 due to rising gold prices. Geopolitical and jurisdictional risks in regions like the DRC and Colombia (Quebradona) could impact operational stability and project development timelines. However, AngloGold Ashanti's proactive cost management, diversified asset base, and strong balance sheet are designed to mitigate these challenges, ensuring resilience and continued progress towards its strategic objectives.

Conclusion

AngloGold Ashanti is in the midst of a profound transformation, successfully repositioning itself as a more cost-competitive and financially robust gold producer. The company's strategic pivot, initiated in late 2021, has delivered tangible results, marked by a significant turnaround in profitability and cash flow generation. The "Full Asset Potential" program, coupled with the adoption of advanced mining technologies, is proving to be a powerful engine for operational efficiency and cost control, enabling AngloGold Ashanti to outperform peers in managing inflationary pressures.

The emergence of Nevada as a world-class gold district, anchored by the Merlin discovery and the North Bullfrog project, represents a compelling long-term growth catalyst that promises to significantly enhance the company's production profile and lower its overall cost structure. While operational challenges and macroeconomic headwinds persist, AngloGold Ashanti's disciplined capital allocation, robust balance sheet, and clear commitment to shareholder returns underscore a strong investment thesis. The company's ability to consistently meet guidance and its strategic focus on high-quality, low-cost assets position it favorably to continue closing the valuation gap with its largest gold competitors and deliver sustainable value in a dynamic gold market.