AngloGold Ashanti (AU) Remains Deeply Undervalued — Even After the Run-Up

AngloGold Ashanti remains deeply undervalued. The company generated $6.2 billion in operating cash flow over the trailing twelve months, trades at a steep discount to its gold miner peers, and sits on a net cash balance. Management just approved a $2 billion share buyback as if the market has not yet priced the business correctly. I see that as the right conclusion — though the 21% rally over five days means the margin of safety has narrowed since this opportunity first appeared.

Let me start with the cash flow story, because that is where the real case lives.

AngloGold Ashanti's Q2 2026 results, reported July 31, show a company whose engine is running hot. EBITDA... rose 46% year-over-year to $1.97bn. Free cash flow increased 36% to $727 million in the quarter. Year-to-date free cash flow stands at $1.9 billion.

Trailing the last twelve months, the numbers are even starker. Operating cash flow hit $6.18 billion. Capital expenditures came in at $1.71 billion, leaving free cash flow of $4.47 billion — a 150% year-over-year jump. That translates to a free cash flow margin of 37.6%. For context, a gold miner converting nearly 38 cents of every revenue dollar into distributable cash is in an elite tier. Revenue itself surged 54.6% year-over-year, driven by an average realized gold price of $4,446 per ounce, up 35% from the prior-year quarter.

The operating margins confirm the quality of this cash generation. EBITDA margin sits at 60.3%, operating margin at 48.7%, and gross margin at 53.5%. Return on invested capital runs at 36.8%, and return on equity at 46.5%. These are not recession-era numbers from a commodity exposed business. They are the kind of returns that command premium valuations — which brings me to the next point.

From a valuation perspective, AngloGold Ashanti is trading like a forgotten asset. The stock trades at 6.0 times EV/EBITDA. Newmont, the largest gold miner by market cap, trades at 7.9 times EV/EBITDA. Agnico Eagle, widely regarded as the sector's quality leader, trades at 8.3 times. Both peers are slower growers with fractionally lower margins and heavier balance sheet debt loads. AngloGold's free cash flow growth of 150% year-over-year dwarfs what either of them has delivered.

If AngloGold re-rated to just the peer average of roughly 7.8 times EV/EBITDA, its enterprise value would jump from $47.5 billion to roughly $62.1 billion — roughly 31% higher. At the current stock price of $96.22, that implies a target in the $126 range, well below the 52-week high of $129.14, suggesting the re-rating has not even fully caught up to where the stock was briefly priced before the recent sell-off.

The dividend picture adds another layer of value that the market ignores. AngloGold carries a trailing-twelve-month dividend yield of 4.8%, compared to 0.9% for both Newmont and Agnico Eagle. The payout ratio sits at 51.8%, which is sustainable — free cash flow of $4.47 billion more than covers the dividend bill of roughly $2.3 billion annualized. H1 2026 dividends alone totaled $949 million, up from $469 million in H1 2025. Then there is the $2 billion share repurchase program, approved by shareholders on July 23. That buyback, executed at current prices, would retire roughly 10% of the outstanding shares — a meaningful accretion to per-share value that the peers are not offering.

Now let's talk about the balance sheet, because a cheap stock with a fragile balance sheet is not a value investment — it is a speculation. AngloGold has total debt of $4.8 billion against cash and equivalents of $2.8 billion, leaving net debt of negative $1.2 billion. The company is a net cash generator. Debt-to-equity stands at 14.8%, which is remarkably low for a miner in this cycle. The current ratio is 2.7, and the quick ratio is 2.1. There are no covenant risks, no debt reclassified to current, no survival question. This is a company that can withstand a meaningful gold price decline and still service its obligations.

The Q2 earnings narrative deserves a closer look. The market has been selling the headline of an "earnings beat," and revenue did beat significantly — $3.1 billion versus the consensus estimate of $2.6 billion. But per-share earnings of $1.96 actually came in below the forecast of $2.23. The gap between revenue strength and earnings miss is largely explained by cash taxes, which more than doubled to $542 million from $237 million a year ago, reflecting higher profitability and catch-up payments. Remaining 2026 cash taxes are guided at $230-$250 million per quarter.

This does not mean the results were weak. It means investors should understand that headline revenue outperformance does not always translate to per-share earnings surprises in the mining sector, where tax timing and realized-price swings can distort quarter-to-quarter comparability. The underlying operational story — 1.5 million ounces produced in H1, a planned 6% production increase in H2, and reaffirmed full-year guidance — tells a stronger tale than the headline EPS miss.

While it's true that the stock has run up 21% over five days and nearly 10% today, the re-rating thesis has not been invalidated. The EV/EBITDA gap to peers remains wide. The free cash flow profile has accelerated, not decelerated. The balance sheet is in net cash territory. The buyback program is a management signal that the board believes shares are still below intrinsic value.

The primary risk to this thesis is a sustained gold price decline. AngloGold's revenue is commodity-exposed, and a 20% drop in gold prices would compress EBITDA and narrow that peer valuation gap faster than management can adjust costs. Even in that scenario, the cost discipline reflected in the 60% EBITDA margin and the net cash balance provide a buffer that most miners cannot match. The 52-week low of $52.05 — less than half the current price — already priced in a much darker gold outlook that never materialized.

All things considered, AngloGold Ashanti is generating free cash flow at a rate its peers cannot match, trades at a material multiple discount to companies with inferior returns, carries a net cash balance, pays a 4.8% dividend, and is authorizing a $2 billion buyback. The recent rally has compressed the margin of safety somewhat, but the re-rating to peer multiples still implies substantial upside.

I reaffirm my Strong Buy rating.