AngloGold Ashanti Ltd. (AU, Financial) was up 1.09% to $8.38 per share in early Thursday trading. However, downswings in the market value of one of the best U.S. publicly-traded gold producers are expected in upcoming days.
The stock depreciation in the third biggest precious metal producer in the world will follow AngloGold Ashanti’s intention to cut up to 2,000 jobs at its South African operations. That represents about 30% of its workforce, reports Mining.com. The job cuts are part of a restructuring plan to try to reduce losses.
The stock in AngloGold Ashanti is already trading cheaply because the share price is underneath the 200, 100 and 50-SMA lines. In addition, the current share price is only 27 cents higher than the 52-week low of $8.02 per share and nearly 50% from the 52-week high of $12.40 per share.
The company’s restructuring of its South African business includes jobs cuts in numerous categories, including at the level of senior management. The effort will likely plunge the market value further below the stock's target price of $12 per share.
It will widen the path to the average target price. At $15.65 per share, it already represents a hefty 90% stock appreciation from the current market valuation. The high limit is $19.70 per share, a projected growth of almost 140%.
The recommendation rating on shares of AngloGold Ashanti is 2 out of a total of 5.
Of course, the underlying commodity needs to stay supportive.
For the remaining of 2018, analysts predict that gold will reach $1,250 per troy ounce on the London Bullion Market, as the U.S. dollar continues to strengthen against the currencies of other countries and U.S. Treasury yields keep rising.
The precious metal shouldn’t experience heavier losses because the real interest rate environment won’t justify it. Analysts project a 75 basis points (bps) interest rate raise to occur in 2018 and another 50 bps rise in the next year.
Analysts are also predicting that a deterioration in the fundamentals of the U.S. dollar will underpin higher gold prices in 2019.
Therefore, at current prices per share of AngloGold Ashanti, investors shouldn’t miss the opportunity to expose their portfolio to an investment in the South African miner. The stock may become even more convenient in the following days of trading.
AngloGold Ashanti has a market capitalization of $3.41 billion, a price-book ratio of 1.23 times versus and industry median of 2.06 times and an Enterprise Value to earnings before interest, taxes, depreciation and amortization ratio of 5.82 times versus an industry median of 9.9 times. The 12-trailing months earnings before interest, taxes, depreciation and amortization margin is 21.3%, which is almost on par with the industry average of 25%.
(Disclosure: I have no positions in any security mentioned in this article.)
