capital raising, page-8

By David Winning
Gold's loss of luster with investors has prompted Macquarie to ask whether
Newcrest Mining may be pushed to launch an equity raising.
Despite its status as a safe-haven asset, the precious metal is down 7% at $1562.3/oz
this month as investors find more comfort in U.S. Treasurys and German bonds, amid a
shaky economic outlook driven by worries over Greece and Spain's sovereign debt
levels.
Macquarie analyst Mitch Ryan says any further fall, below $1,500/oz, would be worth
watching as this would stretch Newcrest's balance sheet, especially as the
company's stated plan is to invest up to 9 billion Australian dollars (US$8.72
billion) over the next five years.
According to his analysis, a gold price of US$1,440/oz or below would be the level at
which Newcrest's gearing and key ratios such as debt/ebitda would come under
pressure--key metrics in assessing its BBB+ debt rating.
"If this situation looked likely to come to fruition, we believe that the
board's prudence could result in the company bringing its debt to more conservative
levels," Mr. Ryan says. "In our mind the most logical solution would be to
conduct an equity raising using Newcrest's Toronto-listed stock. This would have the
added benefit of creating liquidity in the lightly traded TSX line."
He estimated that any equity raising would be in the order of US$500 million to US$1
billion, although he rated the likelihood of it happening over the next 12 months as
small.
Newcrest has raised equity twice in the past five years to strengthen its balance
sheet: A$2 billion in 2007 to close out its hedge book and A$800 million in 2009 to repay
debt and speed up project development.
However, Mr. Ryan noted the company has other options such as delaying small-scale
projects like Bonikro in Ivory Coast or selling assets such as its shareholding in
Evolution Mining. It could also allow its debt rating to be downgraded to BBB.

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