On Monday, Anglo Platinum, the world's No 1 name in platinum group metals (PGMs), held 80% by Anglo American, announced a R12.5bn (about USD 1.6bn) rights issue that, naturally, will be underwritten by Anglo American. USD m 2009 2008 2007 2006 Operating cash flow 558.0 2087.0 1964.0 2512.0 Capital expenditure -1343.0 -1740.0 -1511.0 -963.0 Other 122.0 -12.0 89.0 107.0 Net -663.0 335.0 542.0 1656.0 Free cash flow Operating cash flow 558.0 2087.0 1964.0 2512.0 Capital expenditure -1343.0 -1740.0 -1511.0 -963.0 Free cash flow -785.0 347.0 453.0 1549.0 Debt repaid/(raised) -829.0 -1270.0 -1074.0 547.0 Equity raised 3.0 10.0 14.0 25.0 Cash on hand 479.0 309.0 597.0 712.0 Debt -3088.0 -1701.0 -1123.0 -14.0 Net debt -2609.0 -1392.0 -526.0 698.0 Dividends -1.0 -1671.0 -1741.0 -717.0 USD m 6m09 2008 2007 2006 Operating cash flow -31 700 844 809 Capital expenditure -86 -403 -1503 -1194 Acquisitions & sales -9 -39 -109 442 Net -126 258 -768 57 Free cash flow Operating cash flow -31 700 844 809 Capital expenditure -86 -403 -1503 -1194 Free cash flow -117 297 -659 -385 Debt raised -804 -402 Shareholder advances 500 248 Net debt -3329 -3552 -4057 -2994 Dividends -74 -358 -125 -173 Million Coupon Due USD 1,500 5.500% 2014 USD 2,000 8.950% 2014 USD 1,250 9.375% 2014 USD 1,750 6.500% 2019 USD 1,500 9.000% 2019 USD 750 9.375% 2019 EUR 1,250 4.750% 2012 EUR 1,000 6.375% 2016 Underlying earnings, USD m 1H08 1H09 Base metals 1494 454 Ferrous metals/industries 705 336 Coal 543 505 Platinum 850 30 Diamonds 166 -67 Industrial minerals 139 18 Exploration -93 -67 Corporate & other -321 -113 3483 1096
The issue has a twist, to the extent that Anglo Platinum's debt owed to Anglo American will simply be swapped for equity issued by Anglo Platinum, so that only around ZAR 2.5bn (about USD 325m) in cash will be raised, from minority shareholders. Anglo Platinum paid no cash dividends to speak of in 2009, but across 2006, 2007 and 2008, cash dividends to the sum of USD 4.1bn were paid, mainly to Anglo American. At Anglo Platinum net cash of USD 698m at the end of 2006 turned into a horribly negative net debt of USD 2.6bn at the end of 2009.
In the background, free cash flows at Anglo Platinum fell from a positive USD 1.6bn in 2006 to a negative 785m for 2009. Under pressure from Anglo American, Anglo Platinum has spent years paying out huge dividends that were nowhere nearly covered by free cash flows. Anglo Platinum's "rights issue" will alleviate pressure on its balance sheet for now. Minority shareholders have been offered a deeply discounted rights issue price, limiting the chances of a hullabaloo being raised around the strange structure of the rights issue.
As chief plumber, carpenter and bricklayer, Anglo American is now on repair duty. There is no rights issue cash flow, as such, between Anglo American and Anglo Platinum. Anglo American's latest detailed financial results, for the six months to 30 June 2009, indicated net group debt of USD 11.3bn, ranking the group as one of the world's most indebted mining companies, along with Rio Tinto and Xstrata (which made a play, that could have been serious, for Anglo American, during 2009). Anglo American's net debt had been a relatively modest USD 3.2bn at the end of 2006.
Anglo American has also apparently pressed heavily for dividends from even 45%-held De Beers, which paid out total cash dividends of USD 730m across 2006 to 30 June 2009, a period when it generated negative free cash flow of USD 864m. Beyond that, capital expenditure for De Beers was extraordinarily heavy during 2006 and 2007.
Increasingly strapped, De Beers apparently reached a point during 2008 when it could raise no more debt, and had to rely instead on advances from its shareholders, which include the Oppenheimer family and the Botswana government. For some months now, De Beers has been working on finalizing a USD 1bn rights issue, aimed at fixing its badly damaged balance sheet.
Anglo American's eccentric approach to mining finance was fully on show during 2009. The group raised USD 434m and USD 1.3bn selling the final two legacy tranches of stock it held in AngloGold Ashanti. Anglo American stated that it had secured a USD 1bn loan from the Brazilian development bank, BNDES, for the Minas-Rio iron ore project.
In August 2009, Anglo American launched a USD 1.5bn convertible, a hybrid debt-equity instrument. In a speech at Anglo American's AGM held in London, CEO Cynthia Carroll said: "In terms of liquidity, you will also have seen that just two weeks ago we launched a highly successful USD 2bn bond, for which there was extremely strong demand from investors in both North America and Europe".
While a number of media reports had the two issues as one, the USD 2bn corporate bond and USD 1.5bn convertible are two completely separate instruments. Given certain conditions, the convertibles may at a future date see creditors convert asset debt into equity - ordinary shares - in Anglo American. In the meantime, the convertibles carry interest, like a straight bond. Anglo American pays a far larger coupon, or interest rate, on its bonds, than BHP Billiton, reflecting investor perception of risk.
2009 CORPORATE BONDS
Anglo American, however, resisted a rights issue during 2009, unlike Rio Tinto, which raised USD 15.2bn by issuing fresh shares, and Xstrata, which raised USD 6.4bn. Rights issues, indeed, were the order of the day across the global resources sector, along with bond, and convertible, issues. Even Freeport-McMoRan, one of the world's most cash generative mining entities, raised fresh equity.
Unlike Vale, BHP Billiton and Rio Tinto, which together own about 75% of the market in seaborne iron ore, the world's most lucrative mining franchise, Anglo American is only a minor (but growing) player in the market. As such, Anglo American's half year 2009 financial results took a particular beating.
Anglo American also has a large capital expenditure programme, relative to its size, not least on growth and assets. During 2007 and 2008, Anglo American paid a total of USD 6.7bn in cash to buy 100% of Minas Rio in Brazil, and also 49% of LLX Minas Rio (port of Açu). Anglo American may have already spent billions acquiring Minas Rio, but has budgeted a further USD 3.6bn for capital expenditure to fully develop the phase 1 (only) system, due to reach full production only towards the end of 2013, at the rate of 27m tons a year, wet basis.
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Senin, 08 Februari 2010
Anglo America on the beat
