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

Stock

Value

Instrument

Raising

price

$ bn

$ m

Anglo American

GBP 13.70

27.488

Convertibles

1500.00

Rio Tinto

GBP 24.33

52.491

Bonds

3500.00

Anglo American

GBP 13.70

27.488

Bonds

2000.00

Gold Wheaton

CAD 0.22

0.257

Notes

95.48

BHP Billiton

GBP 14.06

126.826

Bonds

2963.70

Aquarius

GBP 2.63

1.467

Convertibles

73.19

Barrick

$ 29.80

26.018

Bonds

750.00

BHP Billiton

GBP 14.06

126.826

Bonds

3250.00

Alcoa

$ 9.05

8.804

Convertibles

500.00

Rio Tinto

GBP 24.33

52.491

Convertibles

7200.00

Newmont

$ 42.30

20.241

Convertibles

517.50

De Beers (8)

N/A

N/A

S/h loans

500.00

NOTE: not all raisings shown are closed/finalised.

Source: Market & company information, compiled by Barry Sergeant