Johannesburg — ANGLO Platinum (Angloplat) - the world's largest miner of the precious metal - yesterday announced plans to launch SA's biggest rights issue to date to cut its mounting long-term debt.

The company said the rights issue was expected to raise R12,5bn, to be used to reduce its net debt - which soared 43% to R19,3bn at the end of December because of a sharp fall in demand for, and prices of, metals.

The rights issue - to be underwritten by Angloplat's parent, Anglo American - will ease the pressure on the platinum miner's debt-laden balance sheet and allow it to focus on improving performance and shareholder value.

Anglo American - which owns a stake of close to 80% in Angloplat - said its share of the planned rights issue would amount to about R10bn.

The proceeds from the rights offer would be used by Angloplat "to repay debt, including intercompany debt between Anglo American and Anglo Platinum ".

With Angloplat already owing Anglo American R20bn in loans advanced, the rights offer could result in the debt being exchanged for shares to be issued and suggests that this may be a rescue operation by Anglo.

Angloplat's share price rose about 6% yesterday on the news of the rights issue, which analysts said was probably the biggest in the country to date.

Chief financial officer Bongani Nqwababa said the company would issue about 24,9-million new shares to shareholders at R502,18 each, a 25% discount to the share price last Friday. After the rights offer, Anglo plat's net debt would stand at R6,8bn.

"Anglo Platinum will have a more balanced capital structure, enabling it to focus on extracting value from its existing operations through further cost and productivity improvements, and optimising its premium portfolio of assets and growth projects through disciplined investment," Anglo American said.

Angloplat's announcement follows recent speculation in the market that it would have to undertake a rights issue to shore up its balance sheet if it was to sustain its operations.

It also comes as the company reported a 95% fall in headline earnings per share due to a steep decline in platinum prices in the year to December.

Angloplat said it would not pay out a dividend until market conditions improved.

Wonder Nyanjowa, a mining and metals analyst at Frost & Sullivan, said: "I discern a change in management focus in the move. At the height of the commodity cycle in 2008, industry executives were borrowing to expand production. The debt overhang is now affecting financial performance of the company given the weak demand for platinum, and low prices.

"They are now looking at alternative ways to clear the debt and bolster company performance."

Angloplat CEO Neville Nicolau reported that the miner had shed 18 800 jobs since December 2008 in an attempt to cut rising costs and contain mounting debt.

"We believe the rights issue is the right choice to sustain our balance sheet, and secures our financial and operational flexibility and creates capacity for growth," said Nicolau.

"After considering the current level of Anglo Platinum's debt, our board believes that raising additional equity through a rights issue will provide the company with a more balanced capital structure."

Nicolau said this would free the company up to concentrate on improving its existing operations by cutting costs and increasing productivity and, by means of targeted investment, to get the most out of its portfolio of high-quality assets and growth projects.

Nqwababa said the capital raising through a rights issue had been preferred by the company to other options such as issuing preference shares or convertible debt because there was no appetite for these on the market.

"As for the 25% discount, our thinking was that we had to do what was market practice and it was based on other transactions of similar size."

Mark Rule, a resources analyst at BoE, said this was probably the biggest rights issue in SA to date, and said this was a positive move by Angloplat.

"With concerns about the debt burden having been allayed, there is now a lot more momentum on the company's growth plans," Rule said.

"The rights issue is a positive move and the market was well primed for it."