More for miners, nothing for banks
Over the past few months, mining companies have raised, or are raising, USD 52bn outside the banking system, all of it from investors (or each other), and not a penny of it from bailout packages. The biggest single number comes from Rio Tinto, which wants to sell USD 7.2bn in convertibles to Chinalco, a smaller rival based in China, and a further USD 12.3bn by selling various equity stakes in some of its prized assets, also to Chinalco. The deal remains controversial and is yet to pass regulatory and other hurdles.Measured by company number, rather than money quantity, it has been mostly gold names that have been raising capital outside the banking system, most often in the form of bought deals. Brokers typically buy a chunk of fresh equity from a miner, and then on-market it to investors, for a commission. This week saw Moto Goldmines, a developer, announce a bought deal to raise the equivalent of USD 40m. Silver miners have also conducted a number of sought after raisings, as seen in the case of Silver Standard.In the past few weeks, rights issues have also come from some distressed mining sectors. Such issues inevitably entail huge dilutions for existing shareholders, as seen in the cases of Gem Diamonds, which represents one of the biggest names from the most afflicted mining subsector of all. The recent success of diversified miner Xstrata in raising just over USD 6bn in an issue, not matter how highly dilutive, has apparently encouraged miners outside the gold and silver field to utilize investor appetite. Aquarius Platinum, for one, has announced a daring rights issue under the clouds of platinum prices that remain under a cloud, but have also bounced sharply.While rights issues and convertibles (a form of quasi debt, with an equity sweetner) have been the most popular vehicles for capital raising, BHP Billiton, the world’s biggest diversified resources company, and with one of the strongest balance sheets in the industry, recently announced USD 3.23bn in bonds, and a separate EUR 2.25bn, also in bonds.Anglo American, a mining major with certain debt challenges, this week also announced bonds in an amount of USD 2bn. The rates (which are yet to be finalised) tell a story: the BHP Billiton 2019 USD bonds are priced at 6.5%, where the Anglo American USD bonds for the same year are offered at 9.375%.