AngloGold, Gold Fields to get a Brexit boost

REUTERS

File picture: Petr Josek

Johannesburg – AngloGold Ashanti and Gold Fields will receive a cash-flow boost after the UK’s vote to quit the European Union prompted a rally in gold prices, according to Moody’s Investors Service.

AngloGold could make $305 million of free cash flow in the second half of this year if the metal averages $1 300 an ounce, a 65 percent increase on the $185 million it’s forecast to make with bullion at $1 200 an ounce, Dubai-based analyst Douglas Rowlings said in a note Monday. Gold Fields’ free cash flow could rise 37 percent to $185 million by the same measure.

Gold, a haven in times of economic and political crises, has surged 13 percent since the ‘Leave’ campaign won the UK’s referendum on membership of the European Union on June 23. The precious metal rose 0.8 percent at $1 325.70 an ounce at 11:07 a.m. in London. AngloGold and Gold Fields also benefit from the weaker South African rand and Australian dollar, the currencies of the nations where they produce most of their output and in which they pay costs.

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“The contagion-related uncertainty that Brexit brings to the global economy is likely to continue to support demand for safe-haven asset classes, keeping gold prices high and the US dollar strong relative to the Australian dollar and South African rand,” Rowlings said in the note.

AngloGold’s $750 million of bonds due August 2022 are rated Baa3 by Moody’s, the lowest investment grade. The yields dropped to a three-year low of 4.93 percent on Friday, after falling from a record high of 9.53 percent in January.

The yields on Gold Fields’ bonds due October 2020 dropped to the lowest since April…

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