2020 has been a year in which many investors have sought the safety of gold and that has been reflected in the performance of gold stocks. As a form of illustration, it could be a good idea to take a look at the VanEck Vectors Gold Miners ETF, which has managed to generate gains of as much as 32% so far. In this sort of situation, AngloGold Ashanti (NYSE:AU) is one of the stocks that investors could consider taking an interest in.
Earlier this month, the AngloGold stock rallied by as much as 10% after the company announced its financial results for the third quarter. That was the major reason behind the rally and the market reaction was a clear indication that the results were impressive.
It is necessary to take a look at the company’s performance in the quarter. AngloGold produced 837000 ounce of gold, which was an improvement on the 825000 that was produced in the year-ago period. The rise may be marginal but it is significant since, during the first half of the year, the company’s production had nosedived by as much as 5.5%.
While the production came back on track, the coronavirus pandemic related costs pushed all-in sustaining costs by 1% and AngloGold ended up spending $51 for each ounce of gold. The higher costs however could not put a dent in the free cash flow that was generated by the company.
Due to the rise in the realized gold price by as much as 30%, the year on year rise in free cash flow stood at an impressive 290%. This proved to be an excellent turn of events for investors since AngloGold also announced that it was going to pay dividends twice a year instead of once.
However, that is not all. AngloGold also announced that the adjusted EBITDA for the quarter had been boosted by as much as 72% year on year. On the other hand, the company also managed to reduce its net debt by a whopping 50%. Hence, the strong rally in the stock perhaps did not come as a big surprise.
While the latest results have been impressive, it is necessary for investors to note that the mining sector is well known for being highly volatile. Hence, investors would do well to not read into long term trends from the latest quarterly performance.
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