Exposure To Country Risk: The AngloGold Ashanti Edition

| About: AngloGold Ashanti (AU)

AngloGold Ashanti (NYSE:AU) has a market capitalization of $7.3B and is one of the largest gold miners worldwide by this measure. The forward P/E is currently listed as 5.22 on Yahoo.com. Analysts give a median price target of $37.22 which is almost twice the share price of $18.79 at the time of writing. AngloGold Ashanti produced 3.94M ounces of gold in 2012 from mines in 12 different countries. In a series of articles, we have been investigating the country risk of various precious metal mining companies using the geographical distribution of 2012 production, reserve and resource data and in the present article we would like to do so for AngloGold Ashanti.

Most definitions of country risk include factors such as political risk, exchange rate risk, economic risk, sovereign risk, transfer risk, socioeconomic risk and others. Depending on the source, various contributing factors of country risk are weighted differently. We collated country risk ratings for common precious mining jurisdictions from eight different sources and averaged these ratings into compounded country risk scores. The most recent results from this work can be found in this article. Readers interested in the specific definitions are encouraged to follow the links to our sources given in this article.

The table below gives the 2012 numbers for production, reserves and resources for each country that AngloGold Ashanti is active in.

Further consolidating this table for percentages of total production, reserves and resources in each country of activity leads to the table below. Country risk ratings, as documented here, are also shown in the central column of the table. The right side of the table shows the weighted risk contributions for each country separately for production, reserves and resources with summarized scores in the bottom line. The individual ratings can be interpreted as ratings going from present risk (production) into the future (inferred resource). Country risk ratings range from 0 to 100 with low numbers indicating low risk and high numbers indicating high risk.


The country risk rating for AngloGold Ashanti based on production computes to 48.23 indicating considerable country risk. Of the analyzed precious metal miners in this series only Randgold (NASDAQ:GOLD) carried a higher risk.

The rating decreases slightly to 46.08 when considering reserves and shows similar levels when taking into account resources (42.79 for measured and indicated, 46.68 for inferred).

AngoGold Ashanti has many operating assets in South Africa. The country risk rating for South Africa computes to 36.6 despite the recent problems at South African mines. This rating is comparable to Mexico, for example. We would assume that South Africa's country risk rating will increase if mining in South Africa continues to be plagued by strikes and violence. This would also increase AngloGold Ashanti's country risk exposure going into the future.

As we have pointed out in the past, high risk is often associated with high potential rewards which can be desirable for investors comfortable and aware of a given risk level.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.