John Paulson attacks AngloGold spin-off plan

John Paulson, the hedge fund billionaire behind one of the largest investments in AngloGold Ashanti, has sharply criticised the gold miner's plans for a corporate break-up and will oppose the deal.

Mr Paulson said AngloGold's plan would destroy value for shareholders, with the limited benefits of a spin-off of international assets outweighed by the miner's plans for a $2.1bn equity issue.

Paulson & Co, the hedge fund that owns 6.6 per cent of the South African miner, "has no intention to vote for the transaction" proposed by AngloGold, Mr Paulson said.

Shares in AngloGold fell 14 per cent after the miner, the world's third largest in terms of gold production, said this week it intended to raise equity and spin off all its mines and projects outside South Africa into a separately listed UK company.

The miner would hold 65 per cent of the shares in the spin-off and give 35 per cent to its investors.

Before any spin-off, AngloGold is to seek $2.1bn of equity through a rights issue. Proceeds would be used to ensure the miner was debt-free at the time of the spin-off, complying with an agreement struck with the South African central bank.

Srinivasan Venkatakrishnan, AngloGold's chief executive, said the rights issue would go ahead even if the spin-off did not happen, because AngloGold needed to reduce its $3.1bn of net debt.

Mr Paulson said the "massive equity issue" would mean an estimated 50 per cent increase in the shares in AngloGold. "The limited benefits of the partial 35 per cent spin-off are outweighed by the dilution," he said. The comments were first reported by Bloomberg.

Paulson & Co holds significant positions in a number of gold companies, having anticipated rising demand for gold and higher gold prices after central banks intervened to pump liquidity into markets following the 2008 financial crisis.

The miner's largest shareholder is South Africa's state-owned Public Investment Corporation, with a holding of about 10 per cent. Matshepo More, PIC's acting chief executive, said the fund manager was "reviewing the proposed plans by AngloGold to determine its position".

AngloGold said: "We think there is a compelling proposition and a unique opportunity to restructure these assets, to unlock value and improve future growth prospects.

"We have spoken with several shareholders, including Mr Paulson, who has expressed his opinion on the proposed deal."

Other shareholders in AngloGold are likely to scrutinise its plans in talks next week at the Denver Gold Forum, one of the gold sector's largest annual conferences for investors and miners.

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