The primary objective of managing the group’s 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.
The group raised finance of $1.7bn in July 2008 by way of a rights offer enabling the group to reduce the hedge book and redeem the South African corporate bond.
In December 2008, the group secured a $1bn term facility with Standard Chartered PLC which was applied to repay the $1bn convertible bond due for redemption in February 2009. The Boddington sale closed during June 2009 and the first tranche of $750m payment received was applied in August 2009 towards reducing $500m on the Standard Chartered term facility and $250m towards the creation of a revolver facility for $250m resulting in a total facility of $500m. The Standard Chartered term facility was renegotiated for another year to August 2010 and is further extendable thereafter for another year to August 2011.
In addition, 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 part fund the acquisition of an effective 45% interest in the Kibali gold project. The second tranche of the Boddington sale for $240m received towards the end of 2009 was applied to reduce debt.
All the above has restructured the statement of financial position to a net debt to EBITDA of 0.52 times which is well below the banking covenant limit of 3.0 times.
The group monitors capital using a gearing ratio, which is defined as net debt divided by EBITDA. The elements considered to form part of capital are as listed in the Non-GAAP disclosure.
| Figures in million | 2009 | 2008 |
|---|---|---|
| US Dollars | ||
| Borrowings (note 27) | 1,931 | 1,933 |
| Corporate office finance lease (note 27) | (35) | (27) |
| Unamortised portion of the convertible bond | 137 | (4) |
| Cash restricted for use (note 23) | (65) | (44) |
| Cash and cash equivalents (note 24) | (1,100) | (575) |
| Net debt | 868 | 1,283 |
| EBITDA (1) | 1,663 | 1,131 |
| Gearing ratio (Net debt to EBITDA) | 0.52:1 | 1.13:1 |
| SA Rands | ||
| Borrowings (note 27) | 14,355 | 18,270 |
| Corporate office finance lease (note 27) | (258) | (254) |
| Unamortised portion of the convertible bond | 1,019 | (38) |
| Cash restricted for use (note 23) | (481) | (415) |
| Cash and cash equivalents (note 24) | (8,176) | (5,438) |
| Net debt | 6,459 | 12,125 |
| EBITDA (1) | 13,771 | 9,237 |
| Gearing ratio (Net debt to EBITDA) | 0.47:1 | 1.31:1 |
(1) Refer to Non-Gaap note.