GOLD Fields is to issue shares worth R2.5bn which it will use to reduce debt after buying a portion of some $1bn (R15bn) in convertible notes that are due to mature in 2020.
Goldman Sachs said the development, which was not entirely a surprise, could see other gold miners issue shares to shore up their balance sheets, particularly as share prices in the sector had materially improved in the last three months.
“A broader read-across for the mining sector is that the recent rally in share prices on back of the rally in metal prices (while fundamentals remain challenged) could see more companies looking to raise capital to relieve the stress on their balance sheets,” it said.
Shares in Gold Fields have increased nearly 70% over the past 12 months. “We believe that raising equity when the shares are close to two-year highs on the back of the rally in gold price is prudent,” said Goldman Sachs.
“The reduction in debt reduces the interest expense by $7m – not much, but leaves the company with sufficient funds to make an acquisition if it intends to,” it added.
Gold Fields has committed A$86m (R952m) for exploration in 2016 having intensified its search for more gold from last year in which its spent A$91m (R1bn). It described its exploration efforts in Australia as part of a three-year strategy.
The share issue will be through an accelerated book build programme in which it will issue 5% of its share capital raising R2.5bn. The funds would be directed to reducing debt it used to buy $147m of $1bn in notes, with a coupon of 4.875%, which are due by October 2020.
Gold Fields has some $440m of cash on its balance sheet and net debt of about $1.4bn leaving it with a net debt to EBITDA ratio of about 1.27x.
The book build will open with immediate effect and is expected to close by Friday (March 18). “Pricing and allocations will be announced as soon as practicable following the closing of the book,” the company said.
Merrill Lynch is the sole global coordinator and bookrunner in relation to the placing while Scotia Capital is co-bookrunner, Gold Fields said.
