Transnational mining group Anglo American on Thursday launched a $1.5bn convertible, a hybrid debt-equity instrument, adding again to its heavy 2009 capital raising exercises. In a speech at Anglo American's AGM held in London on Wednesday, CEO Cynthia Carroll said: In terms of liquidity, you will also have seen that just two weeks ago we launched a highly successful $2bn bond, for which there was extremely strong demand from investors in both North America and Europe.While a number of media reports have the two issues as one, the $2bn corporate bond and $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.Carroll also announced that Anglo American had recently secured a $1bn loan from the Brazilian development bank, BNDES, for the Minas-Rio iron ore project in Brazil. Earlier this year, Anglo American raised $434m and $1.3bn selling the final two legacy tranches of stock it held in AngloGold Ashanti.If the $1.5bn convertibles are considered as debt, Anglo American has thus upped its debt this year by $4.5bn. At the end of 2008, Anglo American's net debt (including cash) computed at $11bn, leaving current debt (ignoring internal group cash flows, which are unknown) at $15.5bn.Deducting the cash raised from selling the AngloGold Ashanti tranches, this would leave Anglo American's current net debt at about $13.8bn, and would classify Anglo American as the world's No 2 or 3 most-indebted mining entity. At the end of 2008 Rio Tinto's net debt computed at $38.17bn. These numbers can be compared with BHP Billiton, the world's biggest diversified resources group, which ended 2008 with net debt of just $4.20bn. Investors are extracting top dollar returns from capital raisings by Anglo American and Rio Tinto. Where BHP Billiton's recently launched five year $1.5bn bonds carry an annual coupon of 5.5%; Rio Tinto's five year $2bn bonds are at 8.95%, and Anglo American's five year $1.25bn bonds are at 9.375%. BHP Billiton's three year €1.25bn bonds carry a coupon of 4.75%.Anglo American's convertibles are priced, for now, at 4.50%; this can be compared to the 5.25% on the recent Alcoa convertibles, and 3.00% on recent Newmont convertibles. Alcoa carries fairly serious debt, like its big Russian counterpart in the aluminium sector Rusal; Newmont ranks as a leading Tier I global gold digger.In the past few months, mining companies have raised, or are raising, $56bn, completely outside any banking system, using various techniques, and including rights issues and direct placements. The single biggest package - yet to be completed - involves Rio Tinto wanting to sell various equity stakes in some of its most prized assets to smaller rival Chinalco for $12.3bn; Rio Tinto also wants to sell convertibles worth $7.2bn, also to Chinalco.Rio Tinto has in 2009 sold some fine assets, separately to the proposed Chinalco deal: Jacobs Ranch for $761m; potash assets for $850m, and certain iron ore assets for $750m. Most companies of any kind will go a thousand miles before contemplating big rights issues when stock prices are under strain. So far, the global mining sector has seen only one company prepared to take such a massively dilutive route. That was in the form of diversified miner Xstrata, which recently raised the equivalent of around $ 6.2bn.
RECENT SELECTED MINING BONDS, CONVERTIBLES & RELATED
De Beers (8)
NOTE: not all raisings shown are closed/finalised.
Source: Market & company information, compiled by Barry Sergeant