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What Made AngloGold Ashanti Climb the Ranks among Analysts

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Analyst recommendations for AngloGold Ashanti

Similar to Pan American Silver (PAAS), AngloGold Ashanti (AU) has recently climbed into the analysts’ top ten in terms of percentage “buy” recommendations. Until the end of October 2017, it had “buy” ratings from only 46.2% of its analysts, and now it has “buy” ratings from 69.2%.

The stock has seen three upgrades in the past two months, with JPMorgan Chase (JPM), Royal Bank of Canada or RBC Capital, and Deutsche Bank (DB) giving upgrades. RBC Capital noted that the release plan for Obuasi, the ramp-up of its Kibali mine, and the successful disposal of its South African mines as potential upside catalysts for the stock.

Most of the analysts upgrading the stock also believe that after its underperformance YTD (year-to-date), the stock has become oversold and could present an attractive buying opportunity, as it’s cheaper than its peers.

Returns for AU

AngloGold Ashanti stock has underperformed its close peers lately. The stock has fallen 13.5% YTD as of December 11, 2017, while the VanEck Vector Gold Miners ETF (GDX) has gained 2.8% in the same period.

South African mining peers Gold Fields (GFI) and Sibanye Gold (SBGL) have gained 26.2% and 6.9%, respectively. Harmony Gold (HMY), on the other hand, has lost 23.5% YTD.

AngloGold’s target price of 176.28 South African rand implies a potential upside of 40.0%.

Valuations

AngloGold Ashanti (AU) is trading at a forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 3.6x. It has always traded at a discount to the global peers due to its exposure to the riskier South African market.

Right now, the stock is also trading at 14% discount to its South African mining peers. The stock has underperformed YTD, which has made it cheaper than peer stocks, but the materialization of its catalysts (above) could lead to the re-rating of this stock in 2018.

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