Gold miner AngloGold Ashanti said on Monday it would double its dividend payout ratio as profits soared and borrowings decreased on the back of stronger gold prices, sending its shares sharply higher.

The miner said it would now pay shareholders 20% of free cash flow before growth capital expenditure, up from 10%, and would make both annual and semi-annual dividend payments.

AngloGold shares rose 8.7% to 400.99 rand by 1104 GMT.

Higher precious metals prices, including gold's surge to record highs above $2,000 an ounce earlier this year, have offered miners a lifeline after production disruptions caused by the COVID-19 pandemic.

"Doubling our dividend payout ratio demonstrates confidence in our ability to both improve direct returns to shareholders and to self-fund our growth projects and sustaining capital requirements," said AngloGold Ashanti interim Chief Executive Officer Christine Ramon.

AngloGold, which has mines in several African countries including Ghana as well as in Australia and Brazil, said free cash flow nearly quadrupled year-on-year for the third quarter ended Sept. 30.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) during the quarter rose 72% to $803 million from last year, with production rising 1% to 837,000 ounces despite pandemic-related disruptions and stoppages.

The ratio of adjusted net debt to adjusted EBITDA at the end of the quarter was 0.36 times, its lowest level since 2011, compared with 1.06 times a year ago.

"Our forecasts now imply a 3.2% dividend yield for 2021, versus 1.1% previously, which compares very well versus global peers at <2%," RBC analyst Tyler Broda said in a note.

Ramon said the company would return value to shareholders, invest in its current ore bodies and fund greenfield and brownfield projects.

"There is significant optionality in our portfolio, there is no need to look outside," said Ramon. AngloGold said the completion of phase 2 of the redevelopment project at its Ghanaian Obuasi operations was on track for the end of the first quarter of 2021 with plans to start the third phase in the second half of next year.

AngloGold reinstated its annual output forecast in September, to between 3.03 million ounces and 3.10 million ounces, including output to the end of the quarter from its South African assets which it sold to Harmony Gold.

The miner had withdrawn its outlook in March as the pandemic accelerated and many governments restricted travel, closed borders and ordered some operations to close.