NEW YORK (TheStreet) -- Shares of AngloGold Ashanti (AU) are up 5.17% to $7.93 in afternoon trading on Wednesday after the company concluded an investment agreement with Rangold Resources (GOLD - Get Report) .
The two companies agreed to redevelop and operate AngloGold's Obuasi gold mine in Ghana.
AngloGold initiated a program to modernize the mine in 2012 by beginning to develop a ramp access that will connect the blocks of underground ore to the surface.
AngloGold and Rangold will be jointly responsible for funding the redevelopment of the mine with a Randgold group entity to be appointed as operator of Obuasi.
"Obuasi is a world-class resource. We now have to see if we can convert it into a world-class mine. We have a long history of cooperation with AngloGold Ashanti and we look forward to working with them again on charting a new course towards a viable future for Obuasi," said Rangold CEO Mark Bristow.
Shares of Randgold are up 4.82% to $58.23.
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 multiple weaknesses, 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 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 debt-to-equity ratio of 1.42 is relatively high when compared with the industry average, suggesting a need for better debt level management.
- Net operating cash flow has declined marginally to $323.00 million or 4.15% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- AU's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 41.70%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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 change in net income from the same quarter one year ago has significantly exceeded that of the Metals & Mining industry average, but is less than that of the S&P 500. The net income has significantly decreased by 77.5% when compared to the same quarter one year ago, falling from -$80.00 million to -$142.00 million.
- 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