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AngloGold Ashanti Expects Higher Earnings for 2016

- By Alberto Abaterusso

AngloGold Ashanti Ltd. (AU) announced Feb. 2 that it will release complete operating and financial results for fiscal year 2016 on Feb. 21 on the Johannesburg Stock Exchange.

In the meantime, the South African gold producer stated it expects to report a higher income in 2016 compared to 2015. A lower income of $77 million received from the miner's joint ventures in 2016 could partially counterbalance the increases in headline earnings and basic earnings for the period, which is shown in the table below.

Companies listed on the JSE Limited are required to release a trading statement if they expect to report financial results that differ by at least 20% from those of the previous corresponding period.

For fiscal year 2016, AngloGold expects to report an increase in income for the period due to a 7.86% rise in the price of gold sold compared to the previous year and a stronger U.S. dollar versus the Argentinian peso, the Brazilian real and the South African rand, which had a positive impact on operations in those countries.

The miner said it will also benefit from cost control initiatives. These initiatives have allowed AngloGold to reach a level of operating efficiency that enables it to increase operations at mines characterized by a lower gold grade without affecting the operating costs, the all-in sustaining costs and production.

AngloGold Ashanti expects to produce approximately 3.60 million to 3.65 million ounces of gold, in line with expectations. This figure, however, is 5.7% lower than gold production from continuing operations in 2015. The company expects to have processed gold at a total cash costs per ounce of $730 to $750 and at an AISC per ounce of $980 to $1,010.

In addition, the company expects its capital expenditure to be between $790 million and $820 million, in line with the guidance.

The market positively reacted to the preliminary results. The stock closed at $13 per share yesterday, a jump of 46 cents per share (or 3.67%) from the previous trading day. A volume of 6,036,359 shares were traded on the New York Stock Exchange.

The company has a market capitalization of $5.34 billion and an enterprise value of $7.49 billion. The gold stock is trading at 2.02 times its book value and at 6.20 times the Ebitda.

Year to date, AngloGold has gained 23.69% and outperformed the VanEck Vectors Gold Miners ETF (GDX) by 7.16% .

Source: Google Finance

The company outperformed Canada's Barrick Gold Corp. (ABX), which gained 18.51%, and Goldcorp Inc. (GG), which gained 20.58%.

During the same period however, AngloGold was outperformed by another South African miner, Sibanye Gold Ltd. (SBGL), by 7.61%.

As of today, AngloGold Ashanti has a recommendation rating of 2.8. The rating ranges between 1.0 (Strong Buy) and 5.0 (Sell).

The analysts' average target price is $15.55 per share, representing a 19.6% upside from the current share price. The price ranges between a low of $11.92 per share and a high of $22.58 per share.

Disclosure: I have no position in AngloGold Ashanti Ltd.

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This article first appeared on GuruFocus.