AngloGold likely to price USD 2.1bn rights issue at deep discount
AngloGold Ashanti’s (ANG:SJ) proposed USD 2.1bn rights issue will likely be deeply discounted due to the weak capital markets and poor gold price, said sector sources.
The gold mining major today, 10 September, announced that it plans to separate its international portfolio into a separate entity, Newco, to be listed in London.
In order to pursue the restructuring, AngloGold also signaled plans first to raise some USD 2.1bn through a rights issue, which will be used mainly to pay down existing debt.
Referring to recent rights issues by South African platinum players Lonmin and Aquarius Platinum, both of which were offered at a hefty discount, a sector banker said that AngloGold’s rights issue could be discounted by as much as 50%.
An industry source agreed that the rights issue would be deeply discounted. While Lonmin and Aquarius represent a different commodity class, their discounted rights issues point to “frothy” capital markets for resources.
Aquarius offered its recent USD 225m rights issue at a 66% discount.
The size of AngloGold’s rights issue could be of concern, said a buyside analyst. “The magnitude of the rights issue took everyone by surprise,” said the analyst.
However, both the banker and the analyst pointed to the strong cash generative potential of AngloGold’s local assets.
Should AngloGold succeed in its plans to raise USD 2.1bn and squash its debt, the company will be in a strong position to compete with South Africa’s Sibanye Gold in terms of attractive dividend payments, said a sellside analyst.
Sibanye Gold was formed last year when gold mining major Gold Fields unbundled its Kloof, Driefontein and Beatrix mines in South Africa.
Meanwhile, AngloGold is unlikely to acquire any new gold assets following the split of its international portfolio, according to a source close to the situation.
The South African entity will “sweat” its existing portfolio and, in the medium term, would consider diversifying into other commodities, said the source.
There are rich pickings in South Africa with a number of assets up for sale, including platinum assets to be sold by Anglo American Platinum, said a sellside analyst. In July, Anglo Platinum announced that it could exit its Rustenburg and Union mines through a sale or public markets exit.
Following the restructuring of AngloGold there is also the prospect of a potential deal between two of South Africa’s gold producers, said a second sector banker. “Ultimately to my mind there’s one too many South African gold producers – Harmony, Sibanye and AngloGold. Three will become two.”
AngloGold plans to execute the restructuring in 2015 although the move is still subject to a number of approvals including shareholder and regulatory approvals. Approval for the planned restructuring has been received the South African Reserve Bank, subject to various conditions. These include the requirement for South Africa to remain AngloGold’s effective place of management.
AngloGold has a market cap of ZAR 58.3bn (USD 5.4bn). AngloGold could not be reached for comment.