AngloGold Ashanti Ltd. (AU, Financial) jumped 1.52% to $7.35 per share on the New York Stock Exchange on the heels of posting results for the first half of fiscal 2018 before the opening bell on Monday. The stock was up 2.9% to $7.56 per share in early trading on Tuesday.
The first six months showed an improvement in the company's free cash flow. The South African gold producer posted an outflow of $51 million for the first half versus an outflow of $161 million in the comparable period of 2017.
The improvement suggests the company has taken the right approach. Its portfolio reorganization delivered a 4% year-over-year increase in production of gold from retained operations to 1.58 million ounces. The main reorganization consisted of the sale of the underground mines in the Vaal River region of the Republic of South Africa at the end of February. The initiative has had a positive impact on cutting costs as well. The miner's all-in sustaining cost fell 1% to $1,099 per ounce of gold produced.
Returns are also improving. The adjusted earnings before interest, taxes, depreciation and amortization margin increased 360 basis points to 37.6% of revenue on a trailing 12-month basis. Revenue came in at $1.92 billion, which was a 5% decline year over year. AngloGold Ashanti placed 1.651 million ounces of gold on the market at an average price of $1,310 per ounce. A higher gold price and a lower cost per ounce of metal sold enabled the miner to post a positive reversal in the adjusted headline earnings, from a loss of 23 cents per share in the year-ago period to a net profit of 21 cents.
AngloGold Ashanti's balance sheet is also strong. The total liquidity available amounted to $2 billion. The updated net debt to adjusted EBITDA ratio indicates it now takes a little over a year for the company to pay off its debt.Â
Following Monday’s jump, the share price has left the 52-week low. The current share price is 63.3% below the 52-week high of $12.
According to GuruFocus, AngloGold Ashanti has fallen 30% so far this year and is trading below the 100- and 50-day simple moving average lines.
Wall Street recommends buying the stock. The average target price of $13.56 per share represents a nearly 85% upside.
The catalyst for the second half of the year is good production and cost projections. AngloGold Ashanti is aiming for the higher end of the gold production guidance range of 3.3 million to 3.5 million ounces and the lower end of the AISC guidance range of $990 to $1,060 per ounce.
Disclosure: I have no positions in AngloGold Ashanti.
