BMO maintains AngloGold stock Outperform with $40 target

On Tuesday, BMO Capital Markets reiterated its Outperform rating and $40.00 price target for AngloGold Ashanti (NYSE:AU) shares, a mining giant with an $18 billion market cap that has delivered impressive returns of over 54% year-to-date. According to InvestingPro data, the company maintains a "GREAT" financial health score, currently trading near its 52-week high of $36.69. Raj Ray, an analyst with BMO Capital, provided insights from a recent visit to the company’s key operations in Ghana and Egypt.

Last week, Ray and his team toured AngloGold Ashanti’s Obuasi mine in Ghana and the Sukari mine in Egypt. The Obuasi mine, a crucial part of AngloGold’s portfolio, has recently finished an extensive refurbishment program. The Sukari mine, on the other hand, represents a newly acquired asset already in steady-state production. These operations contribute to the company’s robust 26.43% revenue growth and attractive 3.96% dividend yield. InvestingPro subscribers have access to 8 more key tips about AngloGold’s growth potential and financial stability.

The site visits, particularly to Obuasi, bolstered BMO Capital’s confidence in the mine’s potential, leading to expectations of increased long-term production. Additionally, Ray noted the possibility of further optimization at the Sukari mine, which the current estimates have not yet accounted for. This optimistic outlook aligns with the company’s solid fundamentals, including a moderate P/E ratio of 15.28 and strong operational efficiency metrics available on InvestingPro.

The analyst’s statement highlighted the positive outlook: "We visited AngloGold Ashanti’s Obuasi (Ghana) and Sukari (Egypt) mines last week. Both operations are key assets in AngloGold’s portfolio, the former having recently completed its intensive refurbishment program, and the latter, a newly acquired steady-state asset. Our visit to Obuasi raised our confidence in the asset, translating into longer-term higher production expectations. Moreover, we see further optimization opportunities at Sukari, which have not been baked into our estimates. We maintain our Outperform rating and US$40/sh target price."

BMO’s maintained rating and price target reflect the firm’s ongoing optimism about AngloGold Ashanti’s operational capabilities and future performance. The $40.00 price target remains unchanged as BMO anticipates these key assets to contribute positively to the mining company’s growth.

In other recent news, AngloGold Ashanti reported fourth-quarter earnings and revenue that did not meet analyst expectations. The company posted earnings per share of $0.89, falling short of the consensus estimate of $0.99. Revenue for the quarter was $1.72 billion, below the anticipated $1.75 billion. Despite these misses, AngloGold Ashanti achieved significant year-over-year growth in 2024, with free cash flow rising to $942 million from $109 million in 2023 and adjusted EBITDA increasing by 93% to $2.75 billion. The company’s gold production, including output from the recently acquired Sukari mine, was 750,000 ounces in the fourth quarter, up from 738,000 ounces in the previous year. Total (EPA:TTEF) cash costs rose by 9% year-over-year to $1,144 per ounce. AngloGold Ashanti has introduced a new dividend policy targeting a 50% payout of free cash flow, with a base dividend of $0.50 per share annually, declaring total dividends of $0.91 per share for 2024. Looking forward, the company forecasts 2025 gold production between 2.9 and 3.225 million ounces with total cash costs ranging from $1,125 to $1,225 per ounce.

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