Anglo American raised a higher-than-expected $2bn (£1.35bn) in US bond markets after its issue was more than three times subscribed.
The fundraising, which will complete Anglo’s plans to refinance $3bn in debt due this year, comes soon after rival BHP Billiton raised $6.3bn through separate euro and dollar bonds in the last two weeks of March.
Corporate debt is becoming an increasingly attractive funding option for large resources companies, as equity markets are saturated with new placings and investors lose confidence that resource stocks will provide returns higher than coupon rates. “We will see more mining companies doing bond issues this year,” said Debbie Thomas, head of mining at Deloitte. “Equity markets are tough at the moment. But interest rates are low and, if the company has a good balance sheet, corporate debt is a good, cheap option.”
Michael Rawlinson, mining analyst at Liberum Capital, said in a note that after Anglo’s bond issue, “fears over a rights issue should now be extinguished”.
Fears of emergency fundraisings have surrounded most mining companies since Rio Tinto, acknowledging deep uncertainty over metals prices for the next two years, announced plans to raise almost $20bn, largely through the sale of stakes in its most valuable mines.
Miners with far less financial stress than Rio have also raised funds – through rights issues, asset sales, and bonds – to prepare for several lean years in both commodity and resource-finance markets.
Anglo’s net debt of $11bn – compared with operating profits of $10.1bn last year – is not as burdensome as those faced by peers Xstrata or Rio Tinto. However, the miner started shoring up its balance sheet by suspending the 2008 dividend, to the shock of many investors.
Then it sold its residual 11 per cent stake in AngloGold Ashanti for $1.7bn, fully exiting the South African gold business that had been the foundation of the company for the past 80 years.
The roughly $3.7bn raised from the bond and asset sales will more than cover Anglo’s need to refinance debt as it prepares to develop large mines in South America. The funds could also help Anglo to further aid diamond miner De Beers, an affiliate company facing graver financial issues than its quasi-parent. Anglo will loan De Beers $225m this year, free of interest.
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