Yesterday, ratings agency Standard & Poor (S&P) dealt the world’s third largest producer of the yellow metal another blow. AngloGold Ashanti’s “credit rating was downgraded to junk status,” reports IOL
The gold miner was “cut one step to BB+, S&P’s highest non-investment grade, with a stable outlook,” says Bloomberg
. This follows Moody’s decision to “reduce AngloGold’s rating by one level to its lowest investment grade” last week.
This in a year where the gold producer has witnessed its share price half on the JSE.
Rating agency’s concerned about AngloGold’s higher financial risk
AngloGold’s been downgraded as the “$500 per ounce drop in the gold price this year” has increased the company’s “financial risk profile,” notes BDLive
“Increasing input costs, such as electricity and labour” along with ongoing industrial action problems “were also regarded as a challenge by S&P,” notes IOL
In the future, this means AngloGold debt financed through bonds “will be more expensive,” adds BDLive
. And not just that, the company may lose out on potential bond buyers as “some investment houses regard anything rated lower than BBB as risky”.
It’s been a tough week for AngloGold Ashanti.
On Monday, the miner said it “plans to write down its assets and stockpiles by as much as $2.6 billion
” following the gold price’s plunge so far in 2013, notes Bloomberg
Add to that the annual gold miner wage negotiations
currently ongoing. The unions are putting heavy pressure on the gold miners to increase “entry-level worker” pay by double, adds Bloomberg
Tough times for AngloGold Ashanti at the moment.