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S&P demotes Anglogold's credit rating to junk status

by , 18 July 2013

Following a negative trading statement about its second quarter, yesterday Standard & Poor downgraded AngloGold Ashanti's credit rating to junk bond status. Read on to find out what this means for the gold miner…

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.

S&P demotes Anglogold's credit rating to junk status
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