Billionaire Paulson Backs AngloGold Chief Executive (Update5)

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By Matt Craze

Aug. 27 (Bloomberg) — John Paulson, the hedge fund billionaire who earned an estimated $2.5 billion last year betting against a recovery in the U.S. housing market, said he supports managers of AngloGold Ashanti Ltd. after becoming the South African mining company’s biggest investor.

AngloGold Chief Executive Officer Mark Cutifani “is an outstanding leader,” Paulson’s New York-based firm Paulson & Co. said in a statement late yesterday. “He is focusing on safety, low costs, production, growth and diversification.”

Paulson, whose company manages about $29 billion, increased his bets on gold by adding to his stake in Johannesburg-based Gold Fields Ltd. in the second quarter to become the third- largest owner of its U.S.-listed shares. The 53-year-old hedge fund manager bought a $1.28 billion holding in AngloGold, also based in Johannesburg, in March and has since boosted his stake to about 12 percent, according to an Aug. 12 regulatory filing.

Paulson paid $32 a share for the 11.3 percent stake he bought from Anglo American Plc. AngloGold’s American depositary receipts gained about 21 percent since Paulson’s acquisition.

AngloGold rose 83 cents, or 2.2 percent, to $38.80 in New York, its highest close since Aug. 4.

‘Very Interested Shareholder’

“Our experience of him is as a very interested shareholder,” Cutifani said in an interview yesterday in Buenos Aires. “He’s interested in the approach, has a view and likes to share his view, but it’s been nothing but very supportive.”

Hedge funds are private pools of capital whose managers can buy or sell any assets, bet on falling as well as rising prices and participate in profits from money invested.

Paulson earned an estimated $2.5 billion last year, according to Institutional Investor’s Alpha Magazine. His Credit Opportunities Fund soared almost sixfold in 2007 on bets that subprime mortgages would plummet.

The hedge fund’s largest holding is in the SPDR Gold Trust, an investment fund that buys gold bullion in which Paulson has a 9 percent stake. He also has a 4.4 percent stake in Toronto- based miner Kinross Gold Corp., according to the Aug. 12 filing.

Paulson increased his investments in gold companies as governments increase spending to help their economies recover from recession, igniting fears of accelerating inflation.

Colombia, Brazil

AngloGold, Africa’s largest gold producer, is seeking to boost output in Colombia and Brazil to reduce its dependence on aging gold mines in South Africa. The company plans to spend as much as $1 billion next year developing projects including La Colosa in Colombia, which the company has described as the world’s most significant gold discovery in the last decade.

La Colosa is located 150 kilometers (93 miles) west of Bogota and may produce about 800,000 ounces of gold by 2015. The company said earlier this week it received permission from the government to resume exploration at the project after work was suspended last year because of an environmental dispute.

Gold prices have risen 6.9 percent this year compared with a 13 percent increase in the Standard & Poor’s 500 Index of the largest U.S. companies. Demand for gold as a store of value and hedge against inflation rose as governments spend trillions of dollars to combat the worst recession since World War II.

Gold futures for December delivery rose $1.50, or 0.2 percent, to $947.30 an ounce on the Comex division of the Nymex. The price was little changed yesterday.

$1,000 an Ounce

Cutifani predicted gold prices may surpass $1,000 an ounce because of a decline in gold production among the biggest producers. The precious metal last traded above $1,000 on Feb. 20, when the price was the highest since March 28.

“Clearly, John is a supporter of gold as he said at the time and he’s reinforced this in the conversations,” Cutifani said. “Clearly, he has a strong view on the price outlook, it’s certainly no secret his view is on the upside.”

AngloGold expects to produce as much as 6 million ounces of gold within five years, compared with expected output of between 4.7 million ounces and 4.8 million ounces of gold in 2009.

South Africa currently accounts for about 40 percent of AngloGold’s business. This will decline to between 30 percent and 35 percent over the next five years amid expansion in Brazil, Argentina, Colombia and Australia, Cutifani said.

“In South Africa they are mature gold fields,” he said. “The opportunities aren’t as great as in other parts of the world.”

To contact the reporter on this story: Matthew Craze in Santiago

Last Updated: August 27, 2009 17:05 EDT