Investment firm buys 11% stake in AngloGold Ashanti


By Saijel Kishan and Thomas Biesheuvel
Bloomberg News
Tuesday, March 17, 2009

Paulson & Co., the New York-based investment firm run by John Paulson, bought a stake in AngloGold Ashanti Ltd. from Anglo American Plc for $1.28 billion as hedge funds increase their gold holdings.

Paulson paid $32 a share for the 11.3 percent stake in the Johannesburg-based gold miner, Anglo American said today in a statement. The purchase makes Paulson the company's second- largest shareholder, according to data compiled by Bloomberg.

"We believe AngloGold Ashanti is one of the best managed and undervalued of the major global gold-mining companies," Paulson said in an e-mailed statement. "We look forward to the implementation of their global expansion strategy."

Hedge funds are turning to gold to mitigate potential inflation as governments around the world increase spending to stimulate their recession-bound economies. David Einhorn, founder of New York-based Greenlight Capital Inc., told investors in January that he is buying gold for the first time. Hayman Advisors LP's Kyle Bass said investors are seeking precious metals as central banks print more money.

Paulson also owns a 4.1 percent stake in Kinross Gold Corp., making the hedge fund the fourth-largest holder of the gold producer. Paulson is also the second-largest shareholder in chemical-producer Rohm & Haas Co. and has holdings in Cheniere Energy Inc.

Paulson, 53, manages about $30 billion. His Credit Opportunities Fund soared almost sixfold in 2007 on bets that subprime mortgages would plummet. Last year, his flagship fund returned 37 percent, compared with a loss of 19 percent for hedge funds on average.

The firm may have made L311 million ($428 million) since September by betting against the shares of Lloyds Banking Group Plc and HBOS Plc, according to regulatory filings last week.

"He made a name by being able to see the potential for extreme economic events and making bets on those that can pay off," said Michael Dubin, president of New York-based the LongChamp Group Inc., which allocates client money to hedge funds.

Hedge funds are private, largely unregulated pools of capital whose managers can bet on falling as well as rising asset prices, and participate substantially in profits from money invested.

Gold prices have risen 3.7 percent this year compared with a 15 percent decline in the Standard & Poor's 500 Index of the largest U.S. companies. Gold futures for April delivery fell $5.30, or 0.6 percent, to $916.70 an ounce at 3:20 p.m. on the New York Mercantile Exchange's Comex division.

"Hard currency is coming to the fore, as evidenced by the investment choices of some of the world's most seasoned investors," AngloGold Ashanti Chief Executive Officer Mark Cutifani said today in an e-mailed statement.

AngloGold's American depositary receipts, each representing one ordinary share, rose 57 cents, or 1.7 percent, to $34.27 at 3:20 p.m. in New York Stock Exchange trading. The shares have gained 24 percent this year.

AngloGold, the fourth-biggest diversified mining company, dropped 37 pence, or 3.2 percent, to 1,116 pence in London trading.

Anglo, founded in 1917 to mine the world's biggest gold field, said in 2005 it would give up control of the gold business that helped build the Oppenheimer family's fortune and concentrate on copper and iron ore.

It has reduced its stake from 51 percent since then, and has also spun off paper and steel units. Anglo said last month it sold 10.4 million AngloGold shares for about $280 million.

AngloGold is reducing contractual commitments to sell gold at fixed prices so as to secure more room to benefit from earning spot-market prices.

The gold producer, whose biggest mines are in South Africa, also is benefiting from declines by the rand because it pays most of its costs in the currency and sells gold for dollars.

Deutsche Bank AG advised AngloGold and Anglo American, while UBS AG and Goldman Sachs Group Inc. advised Anglo American.

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