ACU Going on SaleAfrican Copper signs financing deal for Natasa Mining
2009-03-16 05:46 ET - News Release
Mr. Chris Fredericks reports
AFRICAN COPPER PLC: PRESS RELEASE
African Copper PLC has signed an agreement with Natasa Mining Ltd., an investment company in the mining finance industry which is listed on the Australian Securities Exchange and on AIM, to assist the company and its subsidiaries (the group) to meet its immediate and critical working capital requirements. Under the terms of the agreement, Natasa has agreed to make available a short-term, interest-free, secured loan facility of $1.5-million (U.S.) (bridge loan), to be repaid out of a proposed $6.5-million (U.S.) private placement of ordinary shares and funds advanced to the company pursuant to a proposed $8.5-million (U.S.) debt facility. The equity placement and debt facility are also proposed to be provided by Natasa.
The bridge loan is conditional upon the execution of security documentation over the group's principal assets, and will be repayable no later than May 15, 2009 (repayment date). It is a further condition of the bridge loan that Natasa appoints two senior managers to Messina Copper (Botswana) (Pty.) Ltd., the company's wholly owned principal operating subsidiary to oversee the application of the proceeds of the bridge loan.
If the bridge loan is not repaid on the repayment date, it will begin to accrue interest at LIBOR plus 10 per cent. Under the terms of the bridge loan, the company has provided Natasa with a right of exclusivity, which, save in certain limited circumstances, prevents the company, from, inter alia, entering into discussions with any other party in relation to any corporate transaction until May 15, 2009.
Under the terms of the proposed equity placement, Natasa has agreed in principle, subject to the agreement of formal legal documentation, to subscribe for 1,581,557,998 ordinary shares at 0.30 pence per share in African Copper to provide gross proceeds of 4.7 million pounds sterling ($6.5-million (U.S.)) to the company. Following the issue of new ordinary shares to creditors described below, the equity placement will result in Natasa holding 70 per cent of the enlarged ordinary share capital of the company. The equity placement will be subject to certain conditions precedent including:
- African Copper shareholder approval;
- Agreement of legal documentation in relation to the debt facility;
- The delisting of African Copper from the Toronto Stock Exchange;
- African Copper and the company's subsidiaries arranging with its bondholders and certain large creditors, namely the company's mining and EPCM contractor, a compromise of debts (debt-for-equity agreement) such that the group's liabilities will be extinguished in full leaving a cash balance of at least $3-million (U.S.) for working capital purposes.
It will also be a condition of the equity placement and the debt facility that all the directors and officers of the company resign and be replaced with nominees of Natasa. These nominees will be identified in the company's information circular to be sent to the company's shareholders to convene the extraordinary general meeting of African Copper in connection with the proposed equity placement, debt-for-equity agreement and other matters.
Under the terms of the proposed debt facility, Natasa has agreed in principle, subject to the agreement of formal legal documentation, to make available a 6.2-million-pound-sterling ($8.5-million (U.S.)) loan facility to Messina that will be secured on the company's principal assets. The debt facility will bear interest at 12 per cent per year on funds drawn, and provides capital and interest repayment from cash generated by the Mowana mine. The debt facility will be conditional on the completion of the equity placement.
As part of the debt-for-equity agreement, it is proposed that African Copper will pay to the creditors the sum of 4.3 million pounds sterling ($5.9-million (U.S.)) representing approximately 20 per cent of the amount owed to them. This payment will be financed from the proceeds of the debt facility and the equity placement. In addition, it is proposed that the company will issue to the creditors 530,951,614 new ordinary shares at a deemed price of 3.2 pence per ordinary share pursuant to the debt-for-equity agreement in satisfaction of the balance of the 17.1 million pounds sterling ($23.7-million (U.S.)) owed to them. Such payment and issue of shares will be in full and final settlement of all sums owed to the creditors and will give to the creditors an interest of 23.5 per cent of the enlarged ordinary share capital of the company following the issue of shares pursuant to the equity placement.
Following completion of the equity placement and the debt-for-equity agreement, the company's enlarged issued share capital is expected to comprise 2,259,368,569 ordinary shares to be held as set out as attached.
Description Ordinary shares(i) Percentage of total following equity placementExisting shares in issue 146,858,957 6.5%Shares to be issued to creditors 530,951,614 23.5%Shares to be issued to Natasa 1,581,557,998 70.0%Total following equity placementand debt-for-equity agreement 2,259,368,569 100.00%(i) The equity placement and debt-for-equity agreement are subject to agreement of legal documentation and therefore the number of shares and the price at which they may be issued is subject to change.
The company's current broker and nominated adviser, Numis Securities, has expressed its intention to resign at the same time as the company's existing directors. Should the company be unable to appoint a new nominated adviser to replace Numis, the company will be suspended from trading on AIM until such appointment occurs. If no such appointment is made within six months the company's AIM quotation will be cancelled.
In view of the fact that the debt facility and the equity placement are subject to the agreement of formal legal documentation, and the fact that the availability of the funds pursuant to the debt facility and equity placement are subject to a number of conditions precedent, including execution of the debt-for-equity agreement, no assurance can be given that any funds will be advanced to and/or raised by the company pursuant to the debt facility and/or the equity placement.
Due to the severe reduction in the demand and price for copper worldwide over the last six months, delays in shipping first concentrate resulting from the delays in commissioning of the Mowana mine, and current market volatility and uncertainty, African Copper has been unable to achieve and/or obtain the anticipated cash flow required to finance its working capital requirements for continued operations. This situation, coupled with the unfolding global financial crisis, has resulted in extreme difficulties regarding the availability and terms of possible financing proposals. The directors have aggressively pursued financing alternatives for the company over the past seven months and have held advanced discussions with a number of finance providers. Having regard to the requirements of the creditors, the directors have determined that the proposed terms of investment by Natasa are the best terms available to the company. In deciding to enter into the bridge loan and the proposed arrangements with Natasa in preference to other possible options available, the board has, in view of the company's financial position, been advised that it must primarily have regard to the interests of the group's creditors rather than the interests of the company's shareholders. The creditors indicated that the proposed transaction with Natasa was preferred by them above other possible options. If the company is unable to complete the proposed transactions with Natasa, the directors believe that the company will be unable (in the absence of immediate alternative financing) to avoid formal insolvency proceedings.
Both the directors of African Copper and the directors of Natasa believe that the group's assets have significant potential. Following completion of the transaction, Natasa will deploy its experienced team of senior mining professionals to optimize financial performance from the African Copper assets. As well as identifying the best mining methods and processing parameters to maximize the short-term and longer-term potential of the Mowana mine, the team will be tasked to evaluate cost-effective expansion of plant throughput capabilities beyond the 25,000-tonne-per-year copper output currently envisaged in the African Copper five-year plan.
A further announcement will be made in due course in relation to the equity placement, the debt facility and the debt-for-equity agreement.