AngloGold Ashanti Ltd.

AngloGold Ashanti Ltd. (AU - Snapshot Report) continues to head higher as gold bugs worried about inflation align themselves with hard assets.

Company Description

AngloGold Ashanti Limited engages in the mining, extraction and production of gold in South Africa and internationally. The company was founded in 1944 and has a market cap of $11.3 billion.

Fourth-Quarter Results

AngloGold's fourth-quarter results, reported on Feb 9, missed expectations due to a number of one-time items, including a $1.25 billion charge on former assets.

All said and done, the company posted a loss of $1 billion for the quarter, or 25 cents per share, behind the consensus calling for a loss of 5 cents. Gold sales came in at $858 million, up from $777 million last year.

Strategic Progress

On the bright side, AngloGold made significant progress in a number of key areas, boosting its production to 1.268 million ounces from 1.265 million ounces last year, and cutting its cash costs 13% to $422 an ounce, creating an opportunity for Anglo to expand its margins.

Hedges Being Removed

Anglo is also in the process of winding down its hedges that put a lid on the company's profits when gold reaches $900. With these hedges trimmed down, Anglo has another source of margin expansion in its belt.

These strategic developments have impacted the earnings projections, with the next-year estimate jumping to $2.25 per share from $1.49 60 days ago.

Valuations

With the next-year estimate pegged at $2.25, this stock has a forward P/E multiple of 15X, a very reasonable reading compared to other gold stock industry brethren.

The Chart/Expect Volatility

This is a stock that is going to carry a strong correlation to underlying gold prices, which have been extremely volatile over the last 12 months in the face of economic uncertainty. This dynamic has played out on the chart, with shares recently settling into a nice 4 month up-trend. Take a look below.