Reports that AngloGold Ashanti Ltd is considering a London listing provided some festive cheer to a city that has lost its way as a home for gold miners.
While Toronto, Johannesburg and Sydney have long hosted the biggest producers, London vies with New York as the world’s premier gold-trading hub and its financiers have bankrolled the industry since the development of South Africa’s giant gold fields more than 130 years ago.
When junior gold miners flocked to the city in the early 2000s, a renaissance seemed at hand.
However, that promise has not been realized as companies from Petropavlovsk PLC and Acacia Mining Ltd to Centamin PLC struggled to reach their potential.
Star performer Randgold Resources Ltd is to exit next year after its acquisition by Barrick Gold Corp, capping a slump in the market value of London-listed gold and silver miners.
That has left fund managers struggling to find liquid gold stocks as the bullion price languishes.
“There has been a lot of value destruction in the sector,” said James Bell, an analyst at RBC Capital Markets in London. “Investors are saying: ‘Not only do I have no conviction on where the gold price is going, but also these companies are fundamentally high-risk.’”
When Randgold delists, the combined market value of London’s gold and silver miners is to drop to less than half the ￡30 billion (US$38 billion) of six years ago.
Just more than a decade ago, Petropavlovsk was worth the same as Randgold and went on to peak at more than ￡2 billion. Today its value has slumped to ￡190 million as the Russia-focused producer is weighed down by crippling debt and overambitious expansion plans.
Barrick-controlled Acacia came to London amid hopes of emulating Randgold’s success in Africa, but was hobbled by operational failures and an increasingly bitter dispute with the Tanzanian government.
The company’s market value dropped by two-thirds since its 2010 listing and there is speculation that the Randgold deal will prompt Barrick to buy back the shares in Acacia that it does not already own.
Still, the departure of Randgold — the best-performing stock in the UK’s FTSE this century — leaves a gap for other producers to woo investors, RBC said.
Just last month, Resolute Mining Ltd, which is listed in Australia, said it would sell shares in London next year as it increases its exposure to Africa.
The biggest prize for London could be AngloGold, the world’s third-largest gold producer.
While no final decision has been made, the company favors a London listing and has been discussing the plan internally and with advisers, according to people familiar with the matter.
The Johannesburg-listed company probably will not move before 2020, as it might need to exit its South African operations first, they said.
Certainly, there is investor appetite for gold stocks, Bell said.
“There is an opportunity,” he said. “But it has to be the right company and it has to be the right size.”
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