Leading gold miner, Newcrest Mining has raised $750 million to repay debt and replenish reserves.
The company joined the club of groups asking the market for more capital, instead of refinancing through its banks.
Newcrest originally sought $500 million in the $27-a-share placement to institutions, which was underwritten by UBS, Goldman Sachs JBWere and Merrill Lynch, but increased the size yesterday afternoon owing to an "overwhelming response" to the issue.
The placement price of $27.00 a share,was a 12.9% discount to Newcrest’s closing price on Friday, 30 January 2009. The new shares will rank equally with existing shares. The placement was fully underwritten.
The shares will emerge from the treading halt this morning. The closed at $31 on Friday. There’s speculation it could buy assets from the stricken Oz Minerals.
To keep the market informed, Newcrest also revealed a modest rise in interim profit. It would have had to tell prospective institutional buyers of its current financial position, so it has informed the market generally as it started selling the issue.
That’s unlike the Commonwealth bank which didn’t update the market in early December when raising cash and claimed it wasn’t material and that the managers (Merrill Lynch) would do it.
It wasn’t done. (The CBA updated the market yesterday, this time on its trading position. It was better than expected)
Newcrest said in yesterday’s statement that it expects underlying after tax earnings for the six months to 31 December 2008 to be in the range of $235 million to $245 million.
"This compares to A$207.9 million for the corresponding period last year. This guidance is preliminary in nature and still subject to finalisation by Newcrest and review by the company’s external auditors.
"Accordingly, the actual results may differ from this preliminary result. Newcrest will release its actual results for the six months to 31 December 2008 on 13 February 2009."
Newcrest said it will use the money raised "to strengthen its balance sheet, enhance its financial flexibility and to take advantage of growth opportunities."
"Specifically, funds would be used to repay approximately A$364 million (US$240 million) in debt; and accelerate planned expansion and increase financial flexibility to pursue growth opportunities as they arise.
"Proceeds of the placement will be used to immediately pay down bilateral debt of approximately A$364 million (US$240 million).
"The US$969 million bilateral debt facility was drawn to US$240 million as at 2 February 2009. This facility matures between January 2010 and September 2010.
"Following the placement, Newcrest will also offer shareholders the opportunity to participate in a non-underwritten Share Purchase Plan ("SPP").
"The SPP will provide eligible shareholders with the opportunity to subscribe for up to A$5,000 worth of Newcrest shares, without incurring brokerage or other transaction costs.
"The SPP will be offered to eligible shareholders on the Newcrest share register at 7.00pm (Melbourne time) on 6 February 2009.
"The offer under the SPP will open on 16 February 2009 and is expected to close on 6 March 2009. Further details of the SPP will be provided to eligible Newcrest shareholders in due course.
"Following the pay down of A$364 million (US$240 million) of bilateral debt and given similar market conditions it is expected that the gearing level will be in the range of 5 – 10% as at 30 June 2009."
Newcrest said it wants to step up the planned expansions at the Cadia East mine in New South Wales and at Gosowong in Indonesia, to deliver increased average annual gold production. Specifically:
"Newcrest has a number of additional organic growth options with the potential to deliver substantial value to shareholders. Furthermore, the current climate may deliver external opportunities and Newcrest wants to be in a strong position if they arise," it said in the statement to the ASX
In commentary on its preliminary profit statement, Newcrest said "Statutory Profit after Tax for the six months to 31 December 2008 is expected to be in the range of $147 million to $157 million, compared to a loss of $8.1 million in the corresponding period last year.
"The statutory profit includes a net expense after tax of $87.6 million relating to non-cash items associated with Newcrest’s close out of its gold hedge book in 2007.
"These non-cash items include the further release from equity of realised gold hedge losses ($120.7 million after tax expense) and realised foreign exchange gains on USD borrowings hedges ($16.2 million after tax gain), plus an increase in fair value on gold put options purchased in 2007 ($16.9 million after tax gain).
"The impact for the corresponding period was an after tax expense of $216.0 million."
It said operating sales revenue for the six months of $1,294.2 million was 15% higher than the same period last year, with higher $A gold prices and copper volumes more than offsetting lower $A copper prices.
"Gold revenue of $955.7 million was 27% higher than the corresponding period driven by higher realised gold prices ($A1, 076 per ounce compared to $A843 per ounce). Gold sales volume of 0.888 million ounces for the current period was only 0.4% below the sales volume of 0.891 million ounces for the comparative period.
"Copper revenue for the current half of $328.8 million was 9% below the same half last year, with the realised copper price 13% lower ($A3.29 per pound compared to $3.80 per pound). Cop
