Anglo American CEO Mark Cutifani. Picture: GETTY IMAGES
Anglo American CEO Mark Cutifani. Picture: GETTY IMAGES

Anglo American will buy back up to $1.95bn of its near-term bonds, deploying its strong cash holdings to strengthen its balance sheet as CEO Mark Cutifani said it would do.

A $1.2bn buy-back offer announced on Wednesday will close on March 14, with settlement on March 19.

The offer extends to bonds due to expire in June 2019, April and November 2020 and April 2021.

This comes after the February announcement that it would redeem a $750m US-denominated bond carrying an expensive 9.375% coupon and due in April 2019.

It is likely Anglo will repeat its actions of 2017 when it bought back bonds and issued a longer-dated bond to pay for the exercise. It would be reasonable to expect Anglo to issue a new bond, extending its debt profile in line with comments from Stephen Pearce, Anglo’s financial director, about aligning the group’s debt profile with its assets and production profiles.

Anglo repurchased $3.1bn of dollar, euro and sterling bonds during 2017 on top of $1.7bn worth of maturing bonds. It paid for this by issuing fresh bonds worth $3bn with maturities of five and 10 years.

Anglo has debt repayments of $12bn between 2018 and up to 2027, with a peak repayment of $1.9bn in 2022.

In its 2017 financial year to end-December, Cutifani committed himself to further strengthening Anglo’s balance sheet during 2018, using the strong commodity prices that helped the company cut net debt to $4.5bn from $8.5bn.

“Given where we are in the commodity price cycle, we intend to strengthen the balance sheet further in 2018,” he said.

“We aim to maintain a stronger balance sheet than in the past, to provide greater financial stability and to allow us to better manage the effects of volatility in the prices for our products through the cycle.”

Anglo has also dipped into its cash to pay shareholders a total $1.3bn in dividends for 2017.

Anglo recorded free cash flow of $4.9bn for the year, of which $2.3bn came from SA. The group, listed in London and Johannesburg, increased cash holdings to $7.8bn from $6.1bn a year earlier. Its share price has grown strongly from a R54.19 low in January 2016 to R288.43 on Wednesday.