NEW YORK (TheStreet) -- AngloGold Ashanti (AU) shares are up 9.75% to $9.57 in morning trading on Tuesday after the gold mining company sold its Cripple Creek & Victor mine to Newmont Mining Corp. (NEM).
AngloGold will receive $820 million as well as 2.5% of future gold production from the mining site in a deal that CEO Srinivasan Venkatakrishnan said will reduce the company's net debt to its target level of 1.5 times its earnings, according to Bloomberg.
Venkatakrishnan also said that the proceeds from the sale represent about a quarter of the company's market cap while the mine produced less than 5% of the company's gold.
Newmont Mining shares are down 1.68% to $25.38 today.
TheStreet Ratings team rates ANGLOGOLD ASHANTI LTD as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate ANGLOGOLD ASHANTI LTD (AU) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk, weak operating cash flow and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 102.6% when compared to the same quarter one year ago, falling from $39.00 million to -$1.00 million.
- The debt-to-equity ratio of 1.33 is relatively high when compared with the industry average, suggesting a need for better debt level management.
- Net operating cash flow has decreased to $190.00 million or 45.71% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 42.61%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 100.00% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, ANGLOGOLD ASHANTI LTD underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full analysis from the report here: AU Ratings Report