Anglo American pumps £1.6-billion into platinum subsidiary

Anglo American, a global leader in mining with diverse mining assets will increase its lending to its platinum subsidiary, Anglo Platinum by 52.5 per cent to £1.6 billion in view of the global collapse in price of platinum.

London-based Anglo American, which owns 80 per cent of Anglo Platinum, has bailed out its subsidiary by increasing its committed facility by R7.1 billion to R20.6 billion after Anglo Platinum net debt had increased by £1.4 billion in the first six ended 30 June and said that its debt would rise even further due to the commitments made on capital expenditure.

Since the beginning of 2008, the global price of platinum has declined from over $2,000 to $700 an ounce at the end of last year, but it has since recovered to about $1,200 an ounce.

With Anglo American's help, ''The group is currently reviewing its funding needs and facilities with the aim of restructuring its existing borrowings,'' Anglo Platinum said in a statement.

Earlier, there were rumours that Anglo Platinum would undertake a rights issue to shore up its balance sheet, ''However, until cash flow improves, the board considers it prudent to continue to suspend dividend payments. Anglo Platinum is confident that its current short-term debt facilities are adequate to meet its near-term funding requirements.'' The company said.

Chief executive Cynthia Carroll of Anglo American, who is under pressure to regain investor confidence after the company's recent overpaid acquisitions and poor performance, will be forced to make further deep cost cuts in Anglo Platinum.