AngloGold Ashanti Tumbles After Dividend Reinstatement Announcement, Insider Trade

The decline is likely due to the condition of the industry

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Despite announcing it was reinstating its dividend after a little over three-year suspension, AngloGold Ashanti Ltd.'s (AU, Financial) stock tumbled over the past week.

After the dividend reinstatement announcement, which was supported by strong growth in 2016 earnings and free cash flow, AngloGold Ashanti fell 12.56% on the New York Stock Exchange. In contrast, gold is up $18.175 per troy ounce or 1.47% on the London Bullion Market, from an average price of $1,236.325 per troy ounce on Feb. 20 to an average of $1,254.50 on Feb. 24.

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Source: Google Finance

According to Barron's Dimitria DeFotis, one reason for the decline could be CEO Srinivasan Venkatakrishnan “sold some recently-vested shares acquired through a profit-sharing program initiated in 2015” for tax reasons related to the company’s incentive plan.

According to AngloGold, the South African miner’s CEO sold a volume of 12,902 common shares for an average price of 155 rand ($11.83) for a total value of 1,999,810 rand on Feb. 23.

The company said that in order “to settle tax costs,” Venkatakrishnan sold an additional 5,367 shares of AngloGold Ashanti for an average price of 155.8032 rand for a total value of 1,999,810 rand.

The average selling price per share ranged between a low of 155.8000 rand and a high of 155.8100 rand.

It is unlikely the stock fell due to the insider trade for two reasons:

  • First of all, the stocks was already falling on the NYSE. As illustrated in the graphic below, the stock began to decline on Feb. 16.

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  • In addition, other gold mining stocks have been downtrending for the last two weeks. As you can see from the graphic below, other gold mining stocks are also down trending on the stock market over the last 2 weeks, of course at a different pace, depending on how they are levered to changes in the gold price:

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Source: Google Finance

The biggest gold producers like Barrick Gold Corp. (ABX, Financial) and Newmont Mining Corp. (NEM) fell less sharply than AngloGold Ashanti, by 7.73% and 9.58%. In contrast, other mid-tier gold producers fell more sharply compared to Anglo Gold Ashanti, including Harmony Gold (HMY, Financial) at -17.78% and Yamana Gold (AUY, Financial) at -20.35%.

AngloGold Ashanti closed at $10.99 per share yesterday, down 60 cents or -5.18% from the previous trading day, with a volume of 5,037,139 shares traded on the New York Stock Exchange.

Following the uptrend in the price of the underlying commodity, the South African gold stock gained 4.57% year to date. The stock is trading at 1.70 times the book value and at 4.69 times the EBITDA.

Disclosure: I have no positions in any stock mentioned in this article.

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