| Fri 29 Jan 2010, 11:03 | | MTX - Metorex - Details Of A US$ 100 Million Capital Raising And A US$100 |
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MTX
MEMTX
MTX - Metorex - Details Of A US$ 100 Million Capital Raising And A US$100
Million Revised Ruashi Mining SPRL ("Ruashi" Or "Ruashi Project") Debt Package,
Including Declaration Data Of A Renounceable Claw Back Offer ("Claw Back Offer")
And Further Cautionary Announcement
METOREX LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1934/005478/06)
JSE code: MTX
ISIN: ZAE000022745
("Metorex" or "the Company" or "the Group")
DETAILS OF A US$ 100 MILLION CAPITAL RAISING AND A US$100 MILLION REVISED RUASHI
MINING SPRL ("RUASHI" OR "RUASHI PROJECT") DEBT PACKAGE, INCLUDING DECLARATION
DATA OF A RENOUNCEABLE CLAW BACK OFFER ("CLAW BACK OFFER") AND FURTHER
CAUTIONARY ANNOUNCEMENT
CEO Terence Goodlace said "This capital raising will significantly strengthen
the Metorex balance sheet and sets the scene for new project development and
value creation. We are pleased to have secured upfront subscription commitments
and undertakings in excess of 80% of our capital raising target amount. The
significant support expressed by key shareholders for our recapitalisation and
growth strategy, combined with the ability to substantially reduce and in the
near term ring-fence Metorex`s project finance debt at Ruashi, will allow
Metorex to enter into this new phase. Our new focus will be on sustainable
growth and expansion, whilst maintaining strict operational, financial and
technical standards. Currently, our potential development projects include the
Central African Copperbelt deposits at Musonoi (Dilala East), Kinsenda and
Lubembe in the DRC and Metorex will apply a disciplined approach in taking these
assets up the value curve."
1. INTRODUCTION
Metorex herewith announces a US$ 100 million (with a Rand equivalent of
approximately R750 million) capital raising programme (the "Equity
Raising") and the simultaneous implementation of a US$ 100 million Ruashi
revised debt package (the "Ruashi Revised Debt Package" or "RRDP")
(collectively referring to the Equity Raising and the RRDP as the "Capital
Restructuring Programme").
1.1 Equity Raising
The purpose of the Equity Raising is to raise sufficient equity
capital to, inter alia:
- trigger the RRDP and allow Metorex to access the significant
benefits arising from the RRDP, as set out more fully in
paragraph 1.2 below;
- take Metorex`s promising development projects (i.e.
Musonoi/Dilala East, Kinsenda and Lubembe) up the value curve
through, inter alia, further drilling and tightening the
reserve/resource estimates for the completion of bankable
feasibility studies;
- provide sufficient working capital to the Group to comfortably
service holding costs in respect of its development projects (in
particular, Kinsenda) whilst further work is being carried out;
- allow Metorex to dispose of or to put on care and maintenance the
non-profitable and cash consuming Consolidated Murchison
division, which is the only remaining non-core operation within
the Metorex portfolio, following the Group`s strategy of
successfully disposing of non-core assets during calendar year
2009; and
- recapitalise the Metorex balance sheet appropriately, including
creating sufficient treasury reserves, to allow Metorex to embark
on a sustainable growth path and to de-risk the business and
asset portfolio.
The application of the proceeds from the Equity Raising is tabled below,
assuming that the Claw Back Offer is subscribed to the extent of US$ 100
million:
Application of funds US$ million
Copper Resources Corporation ("CRC") (holding 23
costs and bankable feasibility studies)
Dilala East (Bankable feasibility study) 4
Consolidated Murchison closure/care and 13
maintenance
Reduction of Ruashi Debt 35
Group treasury 25
Total 100
1.2 Ruashi Revised Debt Package
In order to trigger the RRDP, Metorex will apply US$ 35 million from
the Equity Raising to reduce the outstanding capital balance on the
Ruashi project finance facility ("Ruashi Debt") from the current US$
135 million to US$ 100 million.
The Ruashi Debt balance was recently reduced from US$ 185 million to
US$ 135 million following the application of US$ 50 million from the
proceeds of the disposal of Vergenoeg Mining Company (Pty) Limited, as
announced on 23 September 2009 and 21 December 2009.
In addition to the upfront payment required to trigger the RRDP,
Metorex has to raise a minimum of US$ 60 million in the Equity
Raising. Metorex has already met this requirement by securing
subscription commitments and undertakings of approximately US$ 80
million, as more fully set out in paragraph 7 below.
Metorex successfully negotiated the RRDP with the Ruashi Debt lenders
and achieved the following key objectives:
1.2.1 Ringfencing of Ruashi Debt
In terms of the RRDP, the Ruashi Debt will be ringfenced within the
Ruashi legal entity upon the total outstanding balance of the Ruashi
Debt reducing to below US$ 85 million and provided Ruashi fulfils
various economic performance requirements ("Non-recourse Event").
Furthermore, Metorex will be allowed, without incurring early
repayment penalties or costs, to unilaterally trigger the Non-recourse
Event by reducing the outstanding capital balance of the Ruashi Debt
to US$ 85 million or below, at its sole discretion, should it so wish.
Should Metorex not elect to do so, the next instalment, which will
become due on 1 January 2011 in terms of the new repayment schedule
applicable to the RRDP (refer to paragraph 1.2.2 below), would trigger
the Non-recourse Event.
Terence Goodlace commented "It is a very important milestone for
Metorex to be able to automatically convert the existing Ruashi Debt
into a non-recourse facility, thereby allowing Metorex to progress
other projects without these being exposed to a single existing
project and, if appropriate, also allowing Metorex to introduce
prudent debt levels on a project specific level, without exposing
shareholder funds to any single project."
1.2.2 Introduction of a Debt Holiday
Upon triggering the RRDP, the existing debt repayment profile will be
restructured and Metorex will be granted a debt repayment holiday
during calendar year 2010 ("Debt Holiday").
The only payments that could arise during the Debt Holiday period,
would be:
- voluntary repayments/pre-payments, at Metorex`s sole discretion
and without Metorex incurring any early repayment costs or
penalties; or
- surplus cash repayments under the revised Cash Sweep arrangement
(refer to paragraph 1.2.5 below).
Furthermore, the six-monthly instalments in terms of the remainder of
the Ruashi Debt term will reduce, from the current level of
approximately US$ 25 million, to approximately US$ 16 million each.
Terence Goodlace commented "The Debt Holiday will allow a significant
strengthening of the Metorex balance sheet during the next twelve
months by allowing Metorex to focus on growth and expansion projects,
where we hope to create substantial shareholder value. It will also
allow Metorex to comfortably live out the balance of the unfavourable
pricing on hedges incurred during 2008, which expire by June 2010.
The reduced instalment profile also considerably de-risks the Ruashi
project and the debt balance and repayment profile will now be at
sustainable levels."
1.2.3 Introduction of Hedging Freedom
In terms of the RRDP, Metorex will be granted hedging freedom on
Ruashi`s future copper production and there will not be a lender`s
requirement to incur further hedges. Metorex shareholders
("Shareholders") are referred to the SENS announcement dated 17
December 2009 detailing the current hedging position of the Group.
1.2.4 Securing the Debt Tenure
The existing Ruashi Debt facility requires all early repayments to be
applied in inverse order of maturity, thereby effectively reducing the
tenure of the debt and negatively affecting Metorex`s future gearing
position, both at the Ruashi level and on a Group basis. This
repayment profile also does not allow Metorex to manage its cash flows
pro-actively and affects the Group`s ability to, inter alia, obtain
favourable hedges on copper production and plan any future dividend
declarations.
In terms of the RRDP, all payments, including payments under the Cash
Sweep (refer to paragraph 1.2.5 below), will be applied pro rata in
order of maturity.
Terence Goodlace said "Effectively for the first time, the Ruashi
project finance term and debt tenure has now been secured, which
allows Metorex too properly and proactively plan and on an ongoing
basis, implement its ideal capital structure. Furthermore, whilst the
punitive hedges implemented during December 2008 remain in place until
June 2010, there will be no pressure on Metorex to make any debt
repayments."
1.2.5 Introducing Cash Distribution and Application Freedom
In terms of the existing Ruashi Debt structure, surplus cash generated
by Ruashi has effectively been locked into the project finance
facility, both in terms of repayments and from a debt securitisation
perspective. A cash sweep arrangement is also in place, which could
result in up to 75% of Ruashi`s free cash being applied against Ruashi
debt, in inverse order of maturity, with no management discretion and
restricted distributions to Metorex ("Cash Sweep").
In terms of the RRDP:
- the Cash Sweep will be limited to a fixed 25% of surplus cash
generated by Ruashi;
- the Cash Sweep will automatically terminate when the Ruashi Debt
level reaches US$ 75 million;
- any repayments under the Cash Sweep will be applied in order of
maturity, pro rata to the outstanding instalments over the term
of the Ruashi Debt; and
- Metorex will have full discretion over the distribution and
application of any surplus cash generated by Ruashi, even during
the period whilst the 25% Cash Sweep operates.
Terence Goodlace said "These significant changes will allow Metorex,
and ultimately our shareholders, to have much earlier access to the
upside of Ruashi, especially once we exit the 2008 hedges from 1 July
2010 onwards. Cash distribution freedom will also allow the Group to
now progress other developments whilst maintaining a healthy ring-
fenced gearing ratio at project level."
1.2.6 Removing the requirement for a Debt Service Reserve Account
In terms of the existing Ruashi Debt facility, Ruashi is required to
build up a US$ 25 million debt service reserve account ("DSRA") as
exclusive security to the Ruashi lenders.
In terms of the RRDP, the DSRA requirement has been waived and will
fall away immediately.
Terence Goodlace said "This will effectively free up a further US$ 25
million from the Group`s medium term cash flow profile and allow
Metorex to apply surplus funds generated within the Group towards
other developments or, at Metorex`s discretion, directly against
debt."
1.2.7 Ensuring No Remaining Breach Events
Upon triggering the RRDP, the Ruashi lenders will provide an umbrella
waiver of existing breaches under the Ruashi Debt facility, subject
to, inter alia, the implementation of the RRDP and the reduction of
Ruashi Debt to below US$ 100 million.
Terence Goodlace said "It was very important to Metorex to obtain this
comfort from our Ruashi lenders to allow shareholders to participate
in the Capital Raising without fear of a breach that could adversely
affect the application of funds arising from the Capital Raising."
2. BACKGROUND INFORMATION ON METOREX
During 2008, Metorex was forced to revise its growth strategy to one of
survival. The implementation and execution of this "survival" strategy has
been successful in allowing the Company to survive the trying economic
conditions of the past 18 months, but has also allowed the Group to
redefine itself as a base metals mining company with a portfolio of
operating and exploration assets in the Democratic Republic of the Congo
("DRC") and Zambia.
During 2009 the Company restructured its management team resulting in the
establishment of a core technical executive team and a newly constituted
board of directors ("Board") which was charged with assessing the Company`s
financial and operational position and developing a strategy to maximise
Shareholder value.
The subsequent operational initiatives, which were primarily focused on the
development of Ruashi, have resulted in:
- the completion of a new Ruashi resources and reserve statement and
resultant new mine plan;
- the establishment of pits 1 and 2 at Ruashi;
- Ruashi processing in excess of 300 000 tons of copper ore during the
quarter ended December 2009;
- the recoveries at Ruashi nearing the projected design;
- logistical issues at Ruashi receiving urgent attention;
- projected production at Ruashi being 36 000 tons of copper per annum
and between 4 000 to 5 000 tons of cobalt per annum; and
- the current costs per ton of copper at Ruashi being less than US$2 800
(net of cobalt credits, excluding financing charges).
The capital spend at Ruashi for the 2009 financial year amounted to R752
million (US$ 98 million) and Ruashi`s SX/EW plant is now substantially
complete. There were, and continue to be, bottlenecks and commissioning
issues but these are being systematically addressed and solved through
constraint management. Key capital items outstanding include the acid
plant, the cobalt drying section and the crusher front-end with its
associated coarse ore stockpile, which is to be commissioned.
In addition to the completion of the Ruashi Project the Group remains
committed to the development of its other promising copper and cobalt
assets held in the DRC. These being Kinsenda and Lubembe, which are held
through CRC and a small percentage directly by Metorex, and Dilala East
(also known as Musonoi), which forms part of Ruashi Holdings (Pty) Limited.
During 2009, cash constraints delayed the exploration work needed at the
CRC assets, namely the Kinsenda and Lubembe projects. These two projects
are situated near Kasumbalesa on the DRC/Zambian border.
Lubembe may, subject to feasibility studies, be potentially amenable to
efficient open-pit mining and low stripping ratio oxide open-pit operation.
A feasibility study continues to be advanced for the Dilala East (Musonoi)
project in Kolwezi. This virgin deposit is of a similar style to the nearby
Kamoto underground mine and is located approximately two kilometres north
of the town of Kolwezi and is adjacent to the Katanga Mining Limited
operations.
3. CONDITIONS PRECEDENT
The RRDP remains subject to the fulfilment of, inter alia, the following
terms and conditions:
- Metorex raising and receiving a minimum of US$ 60 million in
shareholders` equity by no later than 30 April 2010;
- approval by the Export Credit Insurance Corporation of South Africa;
- execution of all related facility and security amendment
documentation; and
- a pre-payment to be made against Ruashi`s term loan facilities so that
the total outstanding balance on these facilities is less than US$ 100
million by 30 April 2010.
4. THE CLAW BACK OFFER
The Board, after consultation with its corporate advisors, has decided to
raise the required capital through the performance of the Claw Back Offer.
The Company requires US$100 million (approximately R750 million) for the
purposes described above, but in order to satisfy the appetite for the
Company`s shares at the proposed issue price and provide for any possible
future exchange rate fluctuations, the Company has decided to set the total
quantum of the Claw Back Offer to R900 million thereby allowing
Shareholders the opportunity to increase their stake in the Company at the
proposed issue price by applying for excess securities.
In terms of the Claw Back Offer, 250 000 000 new Metorex ordinary shares of
10 cents each ("Claw Back Shares") will be offered to Shareholders at a
price of R3.60 per share ("Subscription Price"), which represents a 14%
discount to the 30 day volume weighted average share price of Metorex
ordinary shares as at 27 January 2010, in the ratio of 33.233 Claw Back
Shares for every 100 Metorex ordinary shares held on Friday, 19 March 2010
("Record Date").
The Claw Back Offer has been subscribed for to the extent of US$ 80 million
through a combination of commitments to the Claw Back Offer
("Subscriptions") and irrevocable undertakings by Shareholders to follow
their rights in terms of the Claw Back Offer ("Irrevocables"). A liquidity
fee of 1.5% will be paid to those Shareholders which provided Subscriptions
("Subscribers") and a 1% liquidity fee will be paid to those Shareholders
which provided Irrevocables ("Investors").
The monies committed by the Subscribers in terms of the Claw Back Offer
will be received by the Company before the commencement of the Claw Back
Offer thereby guaranteeing that the RRDP comes into effect as in excess of
US$ 35 million is guaranteed to be received by Metorex.
The Claw Back Offer remains conditional, inter alia, upon:
- approval by the JSE Limited ("JSE") of the listing of the Claw Back
Shares and the Claw Back Offer circular incorporating revised listing
particulars; and
- registration of the Claw Back Offer circular incorporating revised
listing particulars with the Companies and Intellectual Property
Registration Office ("CIPRO").
5. THE SUBSCRIBERS
The Subscribers to the Claw Back Offer are detailed below:
Institutional Commitments ZAR US$
Industrial Development Corporation of 150,000,000 20,000,000
South Africa Limited 1
Polaris Capital Management, LLC 1 135,000,000 18,000,000
Minerales Y Productos Derivados S.A. 2 100,000,000 13,333,333
Coronation Asset Management (Pty) 82,500,000 11,000,000
Limited 1
The Standard Bank of South Africa 70,000,000 9,333,333
Limited 2
Old Mutual Investment Group South 49,320,000 6,576,000
Africa 2
Total 586,820,000 78,242,667
1 US$ Commitment converted to ZAR at ZAR7.50/US$
2 ZAR Commitment converted to US$ at ZAR7.50/US$
The Subscribers have committed to subscribe for 167 172 223 Claw Back Shares at
the Subscription Price. The Commitments are on the basis that Shareholders,
recorded in the register as such on the Record Date, be afforded the opportunity
to subscribe for the Claw Back Shares in terms of this announcement and the
related circular to be posted to Shareholders detailing the terms and conditions
of the Claw Back Offer.
The salient features of the subscription agreements to be entered into by the
Subscribers ("Subscription Agreements") are detailed below:
i Liquidity fee
In consideration for the Subscribers agreeing to subscribe for the Claw
Back Shares at the Subscription Price, Metorex shall pay to the Subscribers
a liquidity fee equal to 1.5% (one and a half percent) of the total value
subscribed for in terms of the Claw Back Offer.
ii Suspensive conditions
The Subscription Agreements are conditional upon the fulfilment of, inter
alia, the following suspensive conditions:
- the RRDP becoming unconditionally operative; and
- Metorex obtaining Subscriptions and Irrevocables to the cumulative
value of no less than R375 million.
Further Subscriptions may be obtained from Subscribers until the opening of the
Claw Back Offer, at the discretion of the Board.
6. THE INVESTORS
The Investors to the Claw Back Offer currently comprise Beankin Investments
(Pty) Limited which has undertaken to follow its rights in terms of the
Claw Back Offer to the extent of a minimum of US$ 2 million (R15 million at
R7.50/US$ 1).
Further Irrevocables may be obtained from Investors until the opening of
the Claw Back Offer, at the discretion of the Board.
7. SUMMARY OF ALL COMMITMENTS
The collective quantum of the commitments to the Claw Back Offer received
by Metorex in the form of Subscriptions and Irrevocables from the
Subscribers and Investors, respectively, is summarised in the table below:
Institutional Commitments ZAR US$
Industrial Development Corporation of 150,000,000 20,000,000
South Africa Limited 1
Polaris Capital Management, LLC 1 135,000,000 18,000,000
Minerales Y Productos Derivados S.A. 100,000,000 13,333,333
2
Coronation Asset Management (Pty) 82,500,000 11,000,000
Limited 1
The Standard Bank of South Africa 70,000,000 9,333,333
Limited 2
Old Mutual Investment Group South 49,320,000 6,576,000
Africa 2
Beankin Investments (Pty) Limited 1 15,000,000 2,000,000
Total 601,820,000 80,242,667
1 US$ Commitment converted to ZAR at ZAR7.50/US$
2 ZAR Commitment converted to US$ at ZAR7.50/US$
As illustrated above, Metorex has obtained firm commitments to receive a total
of US$ 80.2 million, thereby ensuring the fulfilment of a condition to the
implementation of the RRDP.
8. PRO FORMA FINANCIAL EFFECTS OF THE CLAW BACK OFFER
The pro forma financial effects of the Capital Restructuring are being
prepared by the Board and are expected to be published on SENS and in the
South African press on or about 1 February 2010.
Until such time as the pro forma financial effects of the Capital
Restructuring have been published, Shareholders are referred to the further
cautionary announcement in paragraph 13 of this announcement below.
9. SALIENT DATES AND TIMES OF THE CLAW BACK OFFER
The salient dates and times of the Claw Back Offer are provided below:
2010
Finalisation date announcement released on SENS and Friday, 5 March
the London Stock Exchange ("LSE") on
Finalisation date announcement released in the South
African press on Monday, 8 March
Last day to trade in Metorex shares in order to
settle by the Record Date and to qualify to
participate in the Claw Back Offer (cum entitlement) Friday, 12 March
on
Listing of letters of allocation ("LA`s") on the JSE
commences at commencement of trading on Monday, 15 March
Metorex shares commence trading ex-rights on the JSE
at commencement of trading on Monday, 15 March
Record Date for participation in the Claw Back Offer
at the close of business on Friday, 19 March
Claw Back Offer circular and form of instruction
posted to Shareholders, where applicable, on Tuesday, 23 March
Claw Back Offer opens at commencement of trading on Tuesday, 23 March
Dematerialised Shareholders will have their accounts
at their Central Securities Depository Participant
("CSDP") or broker automatically credited with their Tuesday, 23 March
entitlement on
Certificated Shareholders on the register will have
their entitlement credited to an account held with
the transfer secretaries on Tuesday, 23 March
Last day to trade in LA`s on the JSE on Wednesday, 31 March
Listing of Claw Back Shares on the JSE commences at
commencement of trading on Thursday, 1 April
Claw Back Offer closes - payments to be made and form
of instruction in respect of LA`s lodged by
certificated Shareholders by 12:00 on Friday, 9 April
Record Date for LA`s on Friday, 9 April
Dematerialised Shareholders` accounts will be updated
with entitlements and debited by their CSDP or broker
and certificates posted to certificated Shareholders Monday, 12 April
on
Results of Claw Back Offer announcement released on
SENS and to the LSE on Monday, 12 April
Results of Claw Back Offer announcement released in
the South African press on Tuesday, 13 April
Notes:
1. Dematerialised shareholders are required to notify their duly
appointed CSDP or broker of their acceptance of the Claw Back Offer in
the manner and time stipulated in the agreement governing the
relationship between the Shareholder and his CSDP or broker.
2. All times indicated are South African times unless otherwise stated.
3. Share certificates may not be dematerialised or rematerialised between
Monday, 15 March 2010 and Friday, 19 March 2010, both days inclusive.
4. The CSDP / broker accounts of dematerialised shareholders will be
automatically credited with new Metorex shares to the extent to which
they have accepted the Claw Back Offer. Metorex share certificates
will be posted, by registered post at the Shareholders` risk, to
certificated Shareholders in respect of the Claw Back Shares which
have been accepted.
5. CSDPs or brokers effect payment in respect of dematerialised
Shareholders on a delivery versus payment method.
10. EXCESS APPLICATIONS
Shareholders will be invited to apply for additional Claw Back Shares over
and above their entitlement. Should there be excess Claw Back Shares
available for allocation, these will be allocated to applicants in a manner
viewed as equitable in terms of the Listings Requirements of the JSE.
The right to apply for excess Claw Back Shares is transferable upon
renunciation.
11. RESTRICTIONS
The Claw Back Shares have not been and will not be registered for the
purposes of the Claw Back Offer under the securities laws of the United
Kingdom, Canada, United States of America or any other country outside
South Africa and accordingly, except as stated below, are not being
offered, sold, taken up, re-sold or delivered directly or indirectly to
rights recipients with registered addresses outside South Africa.
Therefore, the circular, incorporating revised listing particulars,
detailing with details of the Claw Back Offer will be sent to them for
information purposes only. In this regard, the approval of the Registrar in
terms of section 142(2) (a) of the Companies Act is being obtained. The
rights attributable to such rights recipients will, if a premium can be
obtained over the expenses of sale, be sold on the JSE, for the benefit of
such rights recipients as soon as practicable. However, if the net proceeds
of sale in relation to any such rights recipient are less than R5.00, they
will be retained for the benefit of Metorex. No letters of allocation will
be sent, therefore, to any rights recipient whose registered address is in
the United Kingdom, Canada, the United States or any other country outside
South Africa.
Should there be any variations to these restrictions before the
finalisation of the Claw Back Offer, the details of such variation will be
announced on SENS.
12. CIRCULARS
A circular to Shareholders containing details of the Claw Back Offer and
incorporating revised listing particulars will be posted to shareholders on
or about Tuesday, 23 March 2010.
The Claw Back Offer is subject to the approval of the circular and letters
of allocation by the JSE and CIPRO.
13. RENEWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the further cautionary announcement released
by the Company on 21 December 2009 and are advised that the pro forma
financial effects pertaining to the Capital Restructuring will be published
on or about Monday, 1 February 2010, until which publication Shareholders
are advised to continue exercising caution when dealing in the Company`s
securities.
Johannesburg
29 January 2010
Corporate and Debt Advisor, Sole Bookrunner and Lead Sponsor
One Capital
Attorneys
Cliffe Dekker Hofmeyr Incorporated
Bankers to Metorex
The Standard Bank of South Africa Limited
Independent Sponsor
Barnard Jacobs Mellet Corporate Finance (Proprietary) Limited
Date: 29/01/2010 11:03:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
