AngloGold Ashanti (AU) is currently doing fairly well, as it has recently acquired ownership of several mines. The South African company agreed to buy the second half of the Crixas gold mine in Brazil, in order to continue its expansions in the Americas. AngloGold Ashanti will purchase this portion of the mine from Kinross Gold (KGC) for $220 million in cash, and this will give AngloGold Ashanti complete ownership of the mine. Kinross is in the process of selling off its non-core assets in order to streamline its functioning and to optimize its portfolio. This is just one of the many sales we have seen recently.
I believe this is a smart move on AngloGold Ashanti's part. The mining company will now be able to increase its yield from Brazil by a minimum of 500,000 ounces, and its yield from the Americas will increase to about 1 million ounces following this purchase. This is what I want to see from mining companies, as it is significantly increasing its output, especially considering the low price of commodities worldwide. The company's portfolio will be simplified, and it will have more access to Brazil, a country where it has already demonstrated its expertise and success in the recent past.
Chief executive Mark Cutifani stated, "We see long-term, lower-risk potential from Serra Grande (Crixas), which is a key component of our strategy to grow the contribution from the Americas."
For any investors who are worried about where AngloGold Ashanti is getting the money for the purchase, there is no real cause for concern. The money comes from existing cash reserves and debt facilities, so the purchase should not have a negative effect on stockholders. In actuality, the deal should provide significant increases for stockholders in the near future.
In short, this is a good thing for the company, which means this is a good thing for stockholders. Let us quickly investigate a summary of some benefits AngloGold Ashanti will experience. The company's production will be significantly enhanced, and its short-term goals for Brazil will also be enhanced. In addition, AngloGold Ashanti now has 100% ownership of the mining project with no increases in management costs. As a result, the company now has access to further exploration in that area and in the Crixas mine specifically. From what I can tell, this is news that can only mean good things for AngloGold Ashanti's future.
Meanwhile, the Argentinean government is targeting mining firms in an effort to crackdown on imports. This is a situation that affects AngloGold Ashanti, but it will also have an impact on Xstrata and Barrick Gold (ABX). The importation of mining equipment and supplies is now being governed by far stricter rules, and the aforementioned companies will now be required to gain prior approval from the Argentinean government before these imports can occur. This is in an attempt by the government to "boost the trade surplus and foreign currency stocks." In the near future, the companies will also have to consider using locally provided goods rather than imports, which could seriously affect their production success and efficiency.
BHP Billiton (BHP), Rio Tinto (RIO) and Vale (VALE) are three companies attempting to assert their presence in China by signing up for GlobalOre, a company that hopes to rival China's first iron ore physical trading platform. As far as I am concerned, this is one of the more sensible moves that a company could make at this point in time. China is an emerging market that is rapidly expanding, and a foothold in that market will put these companies in good standing for the near future. This is dependent, of course, upon whether or not the rivalry in this case is successful. This shows several competitors expanding into a profitable market, which will have positive impacts on BHP Billiton, Rio Tinto, and Vale stock.
Barrick Gold seems able to easily stay ahead of the competition though. This may be the result of its strategy to focus on its pipeline projects, rather than making huge and costly acquisitions. For example, the company recently made a purchase from Victoria Gold. This purchase increases the land Barrick Gold now owns around its highly profitable and cheap-to-run Cortez mine in Nevada. On top of that, this area is home to a significant discovery, which has been dubbed Goldrush. This is the kind of action that keeps this company at the top, and Barrick Gold stock will probably remain stable and possibly increase a little as a result.
Goldcorp (GG) is experiencing a number of difficulties that give me a rather negative impression of the stock. It is in a legal debate with Barrick Gold regarding the ownership of the El Morro mine. In addition, the license that the company needs in order to start construction at that mine has been suspended by the government of Chile for environmental reasons. This is a major blow for the company, as it would have received a substantial amount of income from that mine if it had been approved and the permit had not been revoked. As a result, Goldcorp stock will probably drop in the near future.
Freeport-McMoRan (FCX) is also having a run of bad luck. There was violence and striking at its mines in Indonesia, which caused a substantial amount of damage to the company's facilities in the area. More recently, the company has had to deal with an unhappy population of locals in the DRC. They claim that Freeport-McMoRan has not made substantial efforts to compensate them for the sacrifices they had to make when the mine in that area was originally built. Whatever the truth is, this kind of bad press is what destroys a stock.
AngloGold Ashanti is doing much better than some of its competitors. Its expansion in Brazil will certainly benefit the company and positively impact the stock. The stricter regulations for imports may hold the stock from rising very much though. Other companies like Barrick Gold may be more likely to increase in the near future, but AngloGold Ashanti still looks strong and will probably maintain a consistent stock price in the near future.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.