Gold Fields seek lengthening loan maturities after cutting costs

gold fields

(Bloomberg) – The South African mining business, Gold Fields Ltd., is searching to lengthen lend maturities after chopping costs by nearly 25%, according to Nick Holland, CEO of Gold Fields.

On Nov. 20, the CEO said that they are looking to see if they can move the pitch of our debt out, mentioning to the borrowings. If you can try and disperse your maturities out, you reduce the risk of major re-financings happening at the identical time, he adds.

The South African business Gold Fields has $2.1 billion of debt outstanding, encompassing $750 million due in 2015 and a $1 billion bond maturing in October 2020, according to the company’s third-quarter conclusion. The Johannesburg-based company’s yields on dollar security dropped 135 points since coming to a record 9.16% on Sept. 12. The average rate of emerging-market metals and mining businesses’ dollar liability has turned down 42 points in the time span, JPMorgan follow & Co. indexes show.

The gold miner, along with its competitor AngloGold Ashanti Ltd., is searching to adjust to a gold price that has fallen 26% in 2013 and is on course for its first annual drop since 2000. Renegotiating lend maturities will give Gold Fields, flexibility to contend with swings in the metal’s price, according to Dion Bate at Moody’s Investors Service. The company cut costs in the third quarter and is increasing its yield in Ghana and Australia.

Removes Risk

Gold area CEO said that their outlook for all corporates is that a thriving try to lengthen maturities removes refinancing risk so would be examined positively. If the bond market or capital-debt markets closed up, a business with a longer-dated borrowing profile is less at risk, he added.

Gold Fields has net liability of about $1.7 billion, according to Holland, accounting for cash on its balance sheet. One billion dollars matures in 2020, and $700 million and we’ll make certain that is disperse over a sensible time span in smaller chunks.”

The lower gold cost, spurred by the U.S. government Reserve’s signal that it designs to taper its $85 billion-a-month asset- purchase program due to an advancing finances, is putting force on gold miners’ margins and share charges. Gold Fields and AngloGold dispatched losses and hovering their dividends in the second quarter.

supply declines

Barrick Gold Corp. shares, the Toronto-based business that’s the world’s biggest gold miner, fell 54% this year, while AngloGold shares were 49% lower. Gold Fields has fallen 56%.

Holland has answered to the lower prices by trimming capital expenditure, exploration expending and expanding production, which should reduce the cost per ounce of gold mined. All-in maintaining costs were $1,089 an ounce in the third quarter this year, compared with $1,416 an ounce in the preceding quarter.

The rand, the South African currency which Gold Fields pays it costs with, has depreciated 16% this year against the dollar, which gold miners obtain for their output. The drop is the large-scale in 2013 amidst 16 major currencies followed by Bloomberg. The rand profited 0.2% to 10.0519 per dollar at 4:52 p.m. yesterday in Johannesburg.

Cost Reductions

AngloGold sold $1.25 billion of bonds maturing 2020 in July to elongate the maturity of its debt profile. Yield on AngloGold’s $700 million of bonds due in April 2020 have fallen 275 points, or 2.75% age points, to 6.32% since then

While the yield on Gold Fields’ 2020 bond has dropped since September’s high, it is still 297 points higher than when it was first traded in October 2010. That shows investors are requiring more interest for lending to the business, which may push up borrowing costs when it arrives to refinancing liability.

Refinancing at a higher rate may be examined contrary “if the added costs are material, putting a higher cost problem on operating money flows to service the spectacular debt,” said Bate at Moody’s. The rankings company has a Ba1 assessment, one step below investment degree, on Gold Fields, with a negative outlook.

Gold for direct consignment fell 0.6% yesterday to $1,236.59 an ounce, the smallest since July 5.