Is AngloGold Ashanti (NYSE:AU) A Risky Investment?

Howard Marks put it nicely when he said that rather than worrying about stock price volatility: ‘The possibility of permanent loss is the risk I worry about… and every practical investor I know worries about too.’ It seems the smart money knows that debt, which is often involved in bankruptcies, is a crucial factor when assessing how risky a company is. As with many other companies AngloGold Ashanti plc (NYSE:AU) leverages debt. So does this debt worry shareholders?

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Debt is a tool to help businesses grow, but if a business cannot repay its lenders, then it is at their mercy. Ultimately, if the company can’t meet its legal obligations to repay debt, shareholders could walk away with nothing. However, a more common (but still painful) scenario is that it will have to raise new equity capital at a low price, thus permanently diluting shareholders. However, the most common situation is when a company manages its debt reasonably well and to its advantage. When we examine debt levels, we first consider cash and debt levels together.

The chart below, which you can click on for more detail, shows AngloGold Ashanti had debt of US$2.14b at September 2025; almost the same as the previous year. However, it has US$2.55b of cash offsetting this, leading to net cash of US$411.0m.

The latest balance sheet data shows that AngloGold Ashanti had liabilities of US$1.76b due within a year, and liabilities of US$3.52b due after that. Offsetting this, it had US$2.55b in cash and US$692.0m in receivables due within 12 months. That means its liabilities total USD 2.04 billion more than the sum of its cash and short-term receivables.

This level of liabilities is unlikely to pose a major threat, as the total value of publicly traded AngloGold Ashanti shares is quite an impressive US$43.2 billion. However, we think it is useful to pay attention to the strength of the balance sheet as it may change over time. Despite its significant liabilities, AngloGold Ashanti has net cash, so it’s fair to say it doesn’t have a heavy debt load!

See our latest analysis for AngloGold Ashanti

Even more impressive, AngloGold Ashanti grew its EBIT by 147% in the twelve months. If this growth is sustained, debts will become more manageable in the coming years. When analyzing debt levels, the obvious place to start is the balance sheet. But it is future earnings, more than anything else, that will determine AngloGold Ashanti’s ability to maintain a healthy balance sheet in the future. If you want to see what the pros think, you can find: This free report on analysts’ profit forecasts be interesting.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While AngloGold Ashanti has net cash on its balance sheet, it’s worth taking a look at its ability to convert earnings before interest and tax (EBIT) into free cash flow to help us understand how quickly it builds (or erodes) its cash balance. Over the last three years AngloGold Ashanti generated solid free cash flow of 59% of its EBIT, as we would expect. This free cash flow puts the company in a good position to pay down debt when appropriate.

We can understand if investors are concerned about AngloGold Ashanti’s liabilities, but we can take comfort in the fact that the company has net cash of US$411.0m. It also impressed us with its 147% EBIT increase last year. So is AngloGold Ashanti’s debt a risk? It doesn’t seem like that to us. The balance sheet is the area to focus on when analyzing debt. However, not all investment risk resides within the balance sheet; It is very far from it. Case in point: We detected 2 warning signs for AngloGold Ashanti You should be aware.

If you’re interested in investing in businesses that can turn a profit without the burden of debt, check out this free List of growing businesses with net cash on balance sheet.

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This article written by Simply Wall St is general in nature. We only provide commentary based on historical data and analyst estimates using an unbiased methodology, and our articles do not constitute financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.