Strategic investors approach Metorex

[] –METOREX’S debt has jumped 40% to more than R2bn and its cash has dwindled to almost nothing, prompting potential strategic investors to approach the company, said CEO Terence Goodlace, who reckoned there should be a deal before the end of this year.

Metorex is trading under a cautionary note to shareholders that it is involved in a process to reduce and restructure the bulk of that debt, most of which was incurred in bringing its Ruashi copper and cobalt project in Democratic Republic of Congo (DRC) into production.

“I can’t divulge exactly what we are going to do, other than say we have a very specific intent to reduce and restructure that debt and we have a whole lot of plans underway,’ said Goodlace. “I don’t know about getting it down to zero but certainly taking a major portion of that debt out would be one of our goals.’

Goodlace said there could be the introduction of a strategic investor at the holding company level, an asset level or on the DRC asset level.

“There are other parties in the world who have cash and interests in base metals. We have had interest expressed from these parties and they would be classified as strategic investors and primarily because they would like offtake or because they see certain parts of our portfolio as items for consolidation,’ he told Miningmx.

Whatever it’s going to do, it has to move relatively quickly, with payments falling due before the end of the year. Financial director Maritz Smith told a results presentation that Metorex may fall short in a payment of $25m in December towards its Ruashi debt.

Smith said it was not something he was losing sleep over and was sure the plans management is working on to de-stress that balance sheet by the end of the year would come to fruition.

Asked if Metorex would be negotiating off the backfoot because it needs to reduce debt, Goodlace said: “No, I think we know we have to do something and we owe it to our shareholders to do something. We need to be proactive and definitive in what we do. Ultimately we must make sure we don’t surprise our shareholders on the downside.’

Metorex has already sold off two assets in gold and platinum and parted with a stake in its Vergenoeg fluorspar to raise a total of R567m to tackle short and medium term payments.

Metorex has largely paid off R190m in corporate loans that fell due in November this year, Smith said.

It is now sitting with debt of R2.14bn. Its mining profit after depreciation fell nearly 60% to R21m in the June 2009 financial year.

Cash has fallen to R19m from R101m, with the funding of Ruashi and its ownership of Copper Resources Corporation, draining money out of the company after it raised R704m in an unpopular rights issue and incurred debt of R487m during the course of the 2009 financial year.

Metorex ran into severe financial difficulties during the financial year as copper prices fell 40% and demand for commodities dried up in the latter stages of 2008. It coincided with Metorex trying to bring the over-time and over-budget Ruashi project on stream.

Metorex needed an “emergency fund raiser’ in December where it issued shares at half the price they were trading at, put in place a bridging loan and restructured debt. Part of Goodlace’s challenge now is to restore the company’s reputation and rebuild investor confidence.