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AngloGold Ashanti Tumbles in Light of Looming Class-Action Settlement

- By Alberto Abaterusso

AngloGold Ashanti (AU) tumbled 5.3% to $9.90 as a result of reports of a decline in adjusted headline annual earnings to $9 million (or 2 cents per share) from $143 million (or 35 cents per share) in 2016.

In early Wednesday trading, the South African gold stock stood at $10 a share, up 1.11%. The bottom line has been impaired due to an estimated $46 million settlement in a class-action suit related to occupational lung disease and retrenchment and restructuring costs of $71 million.

In 2017, AngloGold Ashanti reported a slight 3.3% increase in the production of gold to 3.75 million ounces at an all-in sustain cost (AISC) of $1,054 per ounce of metal sold, from 2016 when the South African miner produced 3.63 million ounces of gold at an AISC of $986 per ounce.

The chart below illustrates the trend in AngloGold Ashanti's yearly production of gold over the last five years:

The South African miner said that the net debt, calculated as cash and cash equivalents minus total debt, increased 4% on a year over year basis to $2 billion in 2017 from $1.92 billion in fiscal 2016.

In 2018, the management "sees improvements across key metrics and also a decision to move ahead with redevelopment of its Obuasi Gold Mine in Ghana, subject to Parliamentary ratification," the news release states.

AngloGold Ashanti has a market capitalization of $4.04 billion and for the 52-weeks through Feb. 20 it has lost 16% on the New York Stock Exchange underperforming the VanEck Vectors Gold Miners ETF (GDX) by 6%.

The South African gold stock is trading below the 50-SMA line, but slightly above the 100-SMA line and far beyond the 200-SMA line. The 52-week range is $ 8.86 to $13.31 per share.

AngloGold Ashanti has a recommendation rating of 2 out of 5 and an average target price of $15.34 per share.

(Disclosure:I have no positions in any security mentioned in this article.)

This article first appeared on GuruFocus.