AngloGold could spin-off assets into separate regional entities

The CEO of AngloGold Ashanti (NYSE:AU) says the company is considering the creation of separate regional entities in South Africa, Colombia and Australia via spin-off of assets in order to enhance shareholder value and better compete against local rivals such as Newcrest Mining (NYSE:NEM).

According to the Australian AngloGold's head Mark Cutifani said that he had fielded the idea before Australian investors during a trip to the country last week.

The Australian-born CEO feels that the creation of a locally listed subsidiary would improve the company's ability to vie for investment against key rivals such as Newcrest Mining.

Spin-offs have drawn increasing attention of late as a means for major gold miners to raise investor value, with shares lagging well behind the recent surge in bullion price due to onerous costs and poor yields.

AngloGold, the world's third largest gold producer, currently has two major mining interests in Australia with plans to establish a third via either exploration or consolidation.

The company's Sunrise Dam goldmine in Western Australia produced 250,000 ounces of gold and USD$385 million in revenue during 2011 despite heavy rains, while AngloGold also holds a 70% stake in the Tropicana project under development in the same state, which is expected to generate 470,000 – 490,000 ounces of gold per year during its first three years of operation.

According to Cutifani an Australian spin-off could possibly be worth several billion dollars but is unlikely to take place until 2014, after the company implements production targets of 5 million ounces globally and 1 million ounces in Australia.

Expansion of the company's gold production in more stable political environments could do much to improve the stability of its earnings, with AngloGold's South African operations severely hampered this year by wildcat strikes and fervent labor unrest.