AngloGold will pay Sars R4.5bn to walk away from SA

AngloGold Ashanti will before Tuesday pay the South African Revenue Service (Sars) a total of R4.5 billion in taxes as part of the transaction to move its corporate domicile to the UK and primary listing to the New York Stock Exchange (NYSE). 

This will see it finally exit South Africa. 

It has a dividend-withholding tax bill due of R4.18 billion and will pay a securities transfer tax of R351 million. This equates to a total of $240 million but will likely be lower due to the exchange rate. This will be a welcome boost for Sars, which is under immense pressure to meet the collection forecasts announced in the budget due to lower growth, depressed commodity prices, and the impact of load shedding on corporate profits. 

Read: Lower mining revenues, load shedding hit the taxman

The taxes in South Africa arose due to the transaction to move its business offshore (it refers to it as a “corporate restructuring”). In practical terms, a new UK holding company, AngloGold Ashanti plc, purchased AngloGold Ashanti Limited. This means that the new entity now holds all of the group’s assets outside of the country. 

At the time it announced the transaction, it anticipated these costs to equal about 5% of its market capitalisation. These payments to Sars, together with estimated landholder duties in Australia of $46 million, will equate to somewhere around 3.5% of its market capitalisation. 

It sold four benefits to shareholders when it announced the transaction: 

• Enhanced access to the world’s deepest pools of capital;
• Improved competitive position in line with the company’s global peers;
• Corporate domicile in a leading, low-risk jurisdiction; and 
• Minimal disruption for existing shareholders.

Given the slow and steady loss of relevance of the JSE in global capital markets (and, arguably, local markets!), one cannot really argue with the first point. On point three, even with post-Brexit chaos and other issues facing the UK, it would be tough to contend that SA is a lower-risk jurisdiction than the UK. 

AngloGold Ashanti says that “major global gold-mining peers with primary listings in North America are currently valued, on average, at a premium of more than 25% to AngloGold Ashanti”. Also, liquidity on the NYSE of that “peer group is well above 50% higher relative to AngloGold Ashanti”, which further reinforces the point about the JSE. 

Read: New York cements itself as gold mining world capital

The fourth benefit cited is a nothingburger. 

Earlier this year, AngloGold Ashanti chair Maria Ramos said: “This is a logical progression for AngloGold Ashanti, which is well aligned with the evolution of the business in recent years and will assist in unlocking value in a way that’s minimally disruptive for our stakeholders. This proposed corporate structure, including a primary listing on the NYSE and a corporate domicile in the UK, will considerably enhance our position in the world’s largest capital markets, while keeping key functions in Johannesburg and a full inward listing on the JSE for our South African shareholders.”

Still to cough up …

Contrasting this bill with its annual tax bill of $674 million suggests this is an enormous amount to pay to extricate itself from South Africa, albeit this is a one-off amount. In 2002, AngloGold Ashanti paid $231 million in tax and $152 million in royalties. Employee taxes totalled $182 million.

AngloGold does not disclose how much tax/royalties it pays each country’s government (unlike its former parent, Anglo American). This is a tricky sum, but it has no active mines in South Africa. Amounts due would be on transactions through the corporate centre. 

Read: End of an era … AngloGold Ashanti moves primary listing to New York

Beyond the tax paid, the miner will also cough up for a number of consultants, accountants, lawyers and other experts for this restructuring. In its latest accounts, being until 30 June, this figure comes to $14 million (R260 million) in additional advisory fees. Expect this number to be higher by year-end. 

By the end of this (financial) year, this herculean transaction will finally be done.

Read:
AngloGold seals South Africa exit with R4.4bn asset sale
Gold Fields and AngloGold Ashanti tear down the fences in Ghana
Why SA-listed gold has lost its sheen