WE may yet be able to stop this train wreck FIRST Uranium has unveiled agreements that will see it selling its assets to and Gold One for $405m to mitigate crippling debt and to avoid a vast dilution of shareholding to repay that debt.
First Uranium on Friday agreed to sell its Mine Waste Solutions, a tailings treatment operation, to AngloGold Ashanti for $335m in cash, and its struggling Ezulwini mine to Gold One for $70m in cash.
If the deals do not go through, First Uranium said it would have to issue 806-million shares representing 77% of its issued share capital to repay convertible debentures falling due soon.
Various funding mechanisms put in place by First Uranium’s previous management have proved to be onerous and have ultimately crippled the company, bringing it to the point where it will no longer exist if both deals go through.
One of these mechanisms included selling part of its production to Franco Nevada for $400/oz against a gold price of $1711/oz, meaning it was selling its gold at a huge loss.
First Uranium has struck a definitive agreement with AngloGold and there is a binding letter of agreement with Gold One. RBC Capital Markets has found the AngloGold Ashanti offer fair and will deliver an opinion on the Gold One offer once that becomes definitive later this month. THERE WE GO LIARS ALL OF THEM
First Uranium shareholders need to approve these highly conditional transactions at a special meeting in mid-May. AngloGold Ashanti owns 19,8% of First Uranium and two-thirds of the other shareholders need to approve these deals. Debenture and note holders would also need to amend their repayment agreements.
Village Main Reef, which has a 5,7% stake in First Uranium, has given its irrevocable support for both deals, which would ensure it is paid for the R393m rand notes it holds as well as a distribution of any remaining cash. GEE I WONDER WHY >>>>>>>>>>>>> DAH P-HUCKER
"They will liquidate and distribute what’s left as a final dividend," Village chief financial officer Marius Saaiman said yesterday. The benefits for Village extend beyond the payments.
"We’ll obviously get our cash back and we’ll no longer be exposed to First Uranium potentially going down the tubes ."
First Uranium, listed in Toronto and Johannesburg, will use $168m of the money to repay convertible notes and $148m to repay debenture holders.
About $36m would be paid out to shareholders, while $30m would be held in escrow accounts to mop up any liabilities falling due on the assets, while First Uranium would retain $23m towards operating and transaction costs.
AngloGold Ashanti will add resources of 2,8-million ounces of gold and 62-million pounds of uranium with the purchase of Mine Waste, which recently commissioned a gold and uranium treatment operation. These are close to AngloGold Ashanti’s own tailings treatment facilities.
"Not only will it add 75000-80000oz to our total output and provide further gold and uranium production upside and significant life extension through synergies … but we have been able to fund a large part of this acquisition from cash generated from our operations," said Mark Cutifani, AngloGold Ashanti CEO.
Gold One owns the Cooke mines next to Ezulwini and plans to be conservative in its forecasts, aiming for 30000oz of gold a year from Ezulwini in the first couple of years as it invests in underground development and about R15m to complete the uranium circuit of the new gold and uranium plant at the mine, Gold One CEO Neal Froneman said
My note, Why can we not negotiate something with the bond holders, if not vote no then they are in the same boat as us. There will still be bankruptsy adn the note holders get the sam eas us ZIP only th esecured get anything guaranteed.