Gold has for many years remained a major store of value whenever the global economy tumbles. Investors always turn to gold to safeguard their portfolio. The current gold reserves are believed to be worth around $7 trillion boosting investor confidence when investing in the precious metal. Gold Fields Limited reaped the benefits when they floated two new bonds totalling $1 billion.
Although gold operators face challenges, they are at times shielded by the status of the precious metal itself in the economic world. Although the price of gold recently broke a major support, investors have not lost faith in the traditional store of value. Gold Fields Limited is ranked among the largest unhedged producers of gold in the world.
The company operates eight mines in Ghana, South Africa (headquarters), and Australia. The public company incorporated in South Africa has 16 gold processing plants spread out in Ghana (4), South Africa (8), Peru (1), and Australia (3). Gold Fields produces 3, 64 million oz per annum. It owns attributable ore reserves of 83 million oz with further mineral resources of approximately 251 million oz.
On May 9, Gold Fields announced the conclusion of raising its two new bonds totalling a staggering $1 billion. These bonds have a $500-million, five-year bond comprising of a coupon of 5.12%. Also, they have a $500-million, ten-year bond featuring a coupon of 6.125%. The average coupon announced by the company was 5.625%.
The eventual cumulative book for the bond issues was at least $3 billion according to the JSE- and NYSE-listed company. The raised amount is expected to assist in the repayment of outstanding amounts listed under the $1.29-billion credit facilities agreement. Additionally, the money will be used to repurchase other existing indebtedness to satisfy general corporate purposes.
In connection to the bond issuance, the company also announced a tender offer for $250-million. That offer is part of the outstanding 4.875% 2020 bonds at a price of 102%.
Evidently, from the company’s 2018 Integrated Annual Report, its primary financial target in the 2019 Balanced Scorecard is to enhance the profile and liquidity of the Group’s debt. That features both extending the maturity of the debt profile and also reducing the net existing debt. Therefore, the bond issue expands and spreads out the maturity of the company’s current debt profile.