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Anglo American completes bond buybacks

René Médori , the  Anglo American Finance Director

Anglo American PLC, the majority shareholder in DeBeers, has announced the successful completion of its bond buyback programme. The buyback programme was mooted in February following decisions by three leading credit rating firms to downgrade the company from investment grade to junk decision.

Standard & Poor’s, Fitch Ratings agency and Moody’s Investor service both downgraded the mining giant to junk status on the backdrop of plunging commodity prices that saw the company posting annual losses of $5 billion as announced on 16th February 2015. With the company now being associated with junk status, its issued bonds became risky hence costly for the company. The latest buyback by Anglo fits in the company’s latest strategy to cut down its net debt and consolidate its balance sheet.

The buyback programme consists of Euro, Sterling and US dollar denominated maturities from December 2016 to September 2018. The mining group had to fork out $1.7 billion of cash to retire $1.83 billion of contractual repayment obligations, resulting in an immediate reduction in net debt of $130 million.

“Although the bond buy-back was funded from cash reserves, Anglo American has maintained its conservative levels of liquidity ($14.8 billion at 31 December 2015) by entering into a $1.5 billion Club Facility with three international banks. This facility has a 2-year maturity, closely matching the weighted average maturity of the bonds targeted and is broadly on the same terms as Anglo American’s existing core $5 billion Revolving Credit Facility, with no financial covenant,” read part of the press release.

The total net debt benefit of the buy-back programme amounts to $190 million by September 2018 ($130 million realised upfront through the discounts achieved on the notes and settlement of derivatives and an additional $60 million over two years through interest savings before fees and expenses).

"The bond buybacks will benefit Anglo American by $190 million in total. We will continue to actively manage our debt profile as we progress with the Group's portfolio restructuring," added, René Médori , the  Anglo American Finance Director.  

In December 2015, the mining giant announced that it was engaging in an accelerated and radical structuring programme to redefine the focus of its asset portfolio to transform the Company’s competitive position and create a more resilient business to deliver sustainable shareholder returns.

In the statement, Mark Cutifani, Chief Executive of Anglo American, said: “Together with the additional material capital, cost saving and productivity measures announced today, we are setting out an accelerated and more aggressive strategic restructuring of the portfolio to focus it around our ‘Priority 1’ assets, being those assets that are best placed to deliver free cash flow through the cycle and that constitute the core long term value proposition of Anglo American. While we have continued to deliver our business restructuring and performance objectives across the board, the severity of commodity price deterioration requires bolder action. We will set out the detail of the future portfolio in February, with the aim of delivering a resilient Anglo American and a step change in the transformation of the Company”.

The radical portfolio restructuring programme includes the mining giant selling off $3 billion to $4 billion of assets; the intention is to reduce number of assets by approximately 60 percent.  

The reduction in number of assets will see the mining company freeing cash flow to focus on its chosen three businesses: World class core portfolio of assets in diamonds, Platinum Group Metals (PGMs) and copper.

Furthermore, Anglo American seeks to reduce its debt from $13 billion to less than $10 billion as it seeks to assure investors and credit ratings that it will stand the current challenges brought about by the plunging commodity prices that came as a result of China’s waning demand for raw materials.

Anglo American’s decision to buy back its bonds is intended to send a strong message that the company has the financial power as well as proactive capital management necessary to support the company’s debt maturity profile.

The $190 million net debt benefit is most likely to win over investors sentiments, adding on the good news that Anglo American has been receiving and releasing. In January, the mining behemoth announced that the value of rough diamond sales (Global Sightholder Sales and Auction Sales) for De Beers’ first sales cycle of 2016 improved significantly to $540 million, compared with the $248 million value of the final sales cycle of 2015. In March they followed again with more good news as rough diamond sales during the second cycle of the year continued their positive trend to $610 million.

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China’s GDP expands 3% in 2022 despite various pressures

2nd February 2023
China’s Gross Domestic Product (GDP) expanded by 3% year-on-year to 121.02 trillion yuan ($17.93 trillion) in 2022 despite being mired in various growth pressures, according to data from the National Bureau Statistics.

The annual growth rate beat a median economist forecast of 2.8% as polled by Reuters. The country’s fourth-quarter GDP growth of 2.9% also surpassed expectations for a 1.8% increase.

In 2022, the Chinese economy encountered more difficulties and challenges than was expected amid a complex domestic and international situation. However, NBS said economic growth stabilized after various measures were taken to shore up growth.

Industrial output rose 3.6% in 2022 over the previous year, while retail sales slightly shrank by 0.2% data show that fixed-asset investment increased 5.1% over 2021, with a 9.1% hike in manufacturing investment but a 10% fall in property investment.

China created 12.06 million new jobs in urban regions throughout the year, surpassing its annual target of 11 million, and officials have stressed the importance of continuing an employment-first policy in 2023.

Meanwhile, China tourism market is a step closer to robust recovery. Tourism operators are in high spirits because the market saw a good chance of a robust recovery during the Spring Festival holiday amid relaxed COVID-19 travel policies.

On January 27, the last day of the seven-day break, the Ministry of Culture and Tourism published an encouraging performance report of the tourism market. It said that domestic destinations and attractions received 308 million visits, up 23.1% year-on-year. The number is roughly 88.6% of that in 2019, they year before the pandemic hit.

According to the report, tourism-related revenue generated during the seven-day period was about 375.8 billion yuan ($55.41 billion), a year-on-year rise of 30%. The revenue was about 73% of that in 2019, the Ministry said.

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Jewellery manufacturing plant to create over 100 jobs

30th January 2023

The state of the art jewellery manufacturing plant that has been set up by international diamond and cutting company, KGK Diamonds Botswana will create over 100 jobs, of which 89 percent will be localized.

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Investors inject capital into Tsodilo Resources Company

25th January 2023

Local diamond and metal exploration company Tsodilo Resources Limited has negotiated a non-brokered private placement of 2,200, 914 units of the company at a price per unit of 0.20 US Dollars, which will provide gross proceeds to the company in the amount of C$440, 188. 20.

According to a statement from the group, proceeds from the private placement will be used for the betterment of the Xaudum iron formation project in Botswana and general corporate purposes.

The statement says every unit of the company will consist of a common share in the capital of the company and one Common Share purchase warrant of the company.

Each warrant will enable a holder to make a single purchase for the period of 24 months at an amount of $0.20. As per regularity requirements, the group indicates that the common shares and warrants will be subject to a four month plus a day hold period from date of closure.

Tsodilo is exempt from the formal valuation and minority shareholder approval requirements. This is for the reason that the fair market value of the private placement, insofar as it involves the director, is not more than 25% of the company’s market capitalization.

Tsodilo Resources Limited is an international diamond and metals exploration company engaged in the search for economic diamond and metal deposits at its Bosoto Limited and Gcwihaba Resources projects in Botswana.  The company has a 100% stake in Bosoto which holds the BK16 kimberlite project in the Orapa Kimberlite Field (OKF) in Botswana.

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