JOHANNESBURG (miningweekly.com) – JSE-listed AngloGold Ashanti on Wednesday said it had pursued a more relaxed financial covenant on its two revolving credit facilities (RCFs) in an effort to protect the company against volatile market and operating conditions.

The proactive agreement would see the gold producer’s two banking syndicates temporarily loosen the net debt to earnings before interest, tax, depreciation and amortisation ratio from 3:1 to a maximum of 4.5:1 for the next two testing periods, in December and June, before reverting back to the original financial covenant.

The previous test, on June 30, revealed a ratio of 1.56:1.

Bank of America Merrill Lynch commented that this was a positive development that would provide AngloGold Ashanti with some balance sheet leeway over the next 18 months.

“Managing the balance sheet is part of the company's initiatives to create a sustainable business in a lower gold price environment,” it added. 

As at June 30, AngloGold Ashanti had an undrawn $1-billion RCF, which matures in 2017, and a A$600-million RCF – with A$480-million drawn – which matures in 2015.

The gold miner’s strategy is focused on improving free cash flow from its portfolio and reducing its overhead expenditure, which accounted for $752-million in 2012, by halving corporate costs to $270-million and narrowing the focus of its expensed exploration programme, to $315-million, over the next year.

“AngloGold Ashanti does not anticipate requiring this additional headroom on the financial covenant, [but] it believes this prudent move will provide the company with greater flexibility to address any volatile market and operating conditions in the short term, as it proceeds with plans to bring its two new projects into production, reduce operating and overhead costs and improve its overall production profile,” AngloGold Ashanti group treasurer Rob Hayes said in a statement.

The 550 000 oz to 600 000 oz of additional production from the Tropicana and Kibali mines in coming months would complement the cost cuts.