The primary objective of managing the groups capital is to ensure that there is sufficient capital available to support the funding requirements of the group, including capital expenditure, in a way that optimises the cost of capital, maximises shareholders returns and ensures that the group remains in a sound financial position.
The group manages and makes adjustments to the capital structure as opportunities arise in the market place, as and when borrowings mature or as and when funding is required. This may take the form of raising equity, market or bank debt or hybrids thereof.
During May 2009, the group secured a successful five year convertible bond issue raising $732.5m. The instrument carries a competitive coupon rate of 3.5% and a conversion price of $47.6126, a premium of 37.5% above the VWAP (volume weighted average price) on the day of the issue. The financing extends the tenor for some of the debt and reduces borrowing costs on the term facility. In July 2009, the group applied $797m to further reduce the hedge book and improve earnings leverage to a higher gold price.
During September 2009, $284m before underwriting discount and issue expenses was raised through an offering of 7,624,162 ordinary shares priced at $37.25 or R288.32 per ADS to partially finance the acquisition of an effective 45% interest in the Kibali gold project for a total consideration including liabilities of approximately $344m. The second tranche of the Boddington sale of $240m received towards the end of 2009 was applied to reduce debt.
During April 2010, the group completed the following key financing transactions:
During September 2010, the group issued equity and mandatory convertible bonds. The equity offering raised $789m via the issue of 18,140,000 shares. The mandatory convertible bonds issued at a coupon rate of 6% raised a further $789m which will be settled in September 2013 by the issue of shares. On 26 October 2010, shareholders, by the requisite majority, approved a special resolution placing up to a maximum of 18,140,000 ordinary shares under the control of the directors, deliverable upon the conversion of the mandatory convertible bonds. These proceeds along with existing bank balances and facilities were deployed to eliminate all outstanding hedge commitments.Gearing ratio (Net debt to EBITDA)
|Figures in million||2010||2009|
|Borrowings (note 26)||2,704||1,931|
|Mandatory convertible bonds (note 26) (1)||(874)||–|
|Corporate office finance lease (note 26)||(39)||(35)|
|Unamortised portion of the convertible and rated bonds||115||137|
|Cash restricted for use (note 22)||(43)||(65)|
|Cash and cash equivalents (note 23)||(575)||(1,100)|
|Gearing ratio (Net debt to EBITDA)||0.68:1||0.52:1|
|Borrowings (note 26)||17,763||14,355|
|Mandatory convertible bonds (note 26) (1)||(5,739)||–|
|Corporate office finance lease (note 26)||(259)||(258)|
|Unamortised portion of the convertible and rated bonds||757||1,019|
|Cash restricted for use (note 22)||(283)||(481)|
|Cash and cash equivalents (note 23)||(3,776)||(8,176)|
|Gearing ratio (Net debt to EBITDA)||0.61:1||0.47:1|
|(1)||For the purposes of this note, the mandatory convertible bonds are treated as equity and excluded from borrowings.|
|(2)||Refer to Non-GAAP note 6.|