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AngloGold, Gold Fields should divest South African mines

There is an excessive discount on their assets offshore because of the news in South Africa.

AngloGold Ashanti (JSE:ANG) and Gold Fields (JSE:GFI), South Africa’s biggest gold producers, should separate their troubled mines in the country from their foreign assets, John Hathaway, the managing director of Tocqueville Asset Management LP, said.

“I have advised the companies we know very well in South Africa that they should think of a way to separate their South African assets away from the rest of their portfolio,” said Hathaway, who manages the $2.5 billion Tocqueville Gold Fund, on a conference call today. “There is an excessive discount on the assets they have outside of South Africa because of the news in South Africa.”

The South African mines of the two companies have been caught up in a wave of illegal and violent strikes that began at the Marikana platinum mine owned by Lonmin (JSE:LON) on Aug. 10. Workers, defying their main labor union, are demanding pay rises even though an existing pay agreement has not run its course.

“I have a great deal of concern,” the manager of the New York-based fund said. “Every year it seems to be getting a little worse.”

Split, Divest

AngloGold mines about a third of its metal in South Africa, owns operations in countries including Ghana and Australia and is considering digging mines in The Democratic Republic of Congo and Colombia. Gold Fields gets half of its metal from South Africa and has operations in Peru, Ghana and Australia.

The South African mines could be separated into different companies or “divested,” he said.

AngloGold shares fell 4.4 percent to 287.47 rand a of 4:33 p.m. in Johannesburg while Gold Fields declined 2.7 percent to 103.64 rand.

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