Avmin and Avgold may restructure debt to benefit f
Resources Correspondent
ANGLOVAAL Mining (Avmin) and its 56%-held gold subsidiary Avgold are considering a debt restructuring in an effort to benefit from the strength of the rand.
The company, which has about $140m in debt after write-downs at its Zambian copper and cobalt operations, said yesterday that now was the ideal time to look at the debt structure and assess how to use persistent rand strength against the dollar to advantage.
Avmin vice-president Julian Gwillim said one option for Avmin was to capitalise on Target's improved performance.
"Target provides a strong platform to place a proportion of Avmin's stake in Avgold offshore, while maintaining our controlling interest in the company. This is one of a number of ways we are looking at reducing Avmin's debt," said Gwillim.
He said there was much interest in the Target mine. The market for gold as an investment was still relatively strong.
Target's performance is improving, and yesterday Avgold said the majority of the start-up problems at the highly mechanised mine had been resolved.
In the three months to the end of March Target sold 2583kg of gold, and cash costs fell to $176 an ounce.
Avgold, like Avmin, is also mulling over ways to restructure its debt. It has entered a provisional agreement with an unnamed SA bank on a R600m bridging facility which, if a final loan agreement is reached, would allow for a restructuring of the company's debt.
Avgold chairman Rick Menell said: "The proceeds from the sale of ETC and the restructuring of Avgold's financial obligations will significantly enhance the financial position of the company."
As part of proposed restructuring Avgold would use the rand to its advantage and move to pay off the $32m component of its total debt of about R530m.
Gwillim said: "Once Avgold has settled its R530m debt with the bridging loan it can use the proceeds from the ETC sale and existing cash to settle the majority of the bridging loan. This will leave Avgold with the R200m general corporate facility, which it can draw down as and when and if required."
Dave Hall, a mining analyst with Merrill Lynch SA, said moves to restructure the debt were positive.
Avgold said March quarter's net profit fell to R41,2m from R67,5m posted in the December quarter, with the decline in earnings linked to a fall in unrealised foreign exchange gains.
In the previous quarter Avgold had an exceptional unrealised foreign-exchange gain of R62,6m, but this time it was R14,1m. Sales in the period grew to R278m from R242m in the December quarter.
Avgold's hedge book was cut, falling to R149m, after R485m in the December quarter. The company said no new hedging was required.
Apr 08 2003 07:40:17:000AM Julie Bain Business Day 1st Edition
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08 April 2003
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