[miningmx.com] — Metorex, a copper/cobalt, producer has agreed new hedging arrangements over a third of its production from the Ruashi project, which means it will be able to repay a $100m loan if the copper price falls.
Metorex has completed a process of selling non-core assets and restructuring its balance sheet to cut down on debt and sharpen focus on its copper and cobalt projects in the Democratic Republic of Congo and Zambia.
Metorex told the market at the end of January that it was raising $100m via a rights placement and was is putting in place a revised $100m debt package at Ruashi, its flagship copper operation in the DRC.
Metorex has received R586.8m in initial subscriptions to the claw back offer, allowing it to make a payment of $35m towards Ruashi’s debt, triggering more favourable terms and bringing debt levels at the project to $100m, which is now ring fenced within that project.
Because of this, Metorex has put in further hedging agreements for its Ruashi copper production in financial 2012, covering 12,000 tonnes, or a third, of copper production, giving it three years of contracted sales and giving it confidence it can repay the $100m.
Metorex will sell 7,800 tonnes of copper between March and June 2010 at $3,900/tonne. It will sell 16,200 tonnes at $5,972/tonne between July this year and June 2011. If the following year it has 12,000 tonnes hedged between $6,600 and $7,600/tonne.
“This hedge book now considerably mitigates the impact of potential negative movements in the copper price on Ruashi’s ability to service the Ruashi debt,’ Metorex said.
Metorex CEO Terence Goodlace said in January of the $100m, Metorex will retain $25m in treasury, spend a further $23m on its CRC subsidiary, which includes holding costs and bankable feasibility studies on projects like Kinsenda and Lubembe.
Metorex will spend $35m on reducing debt at Ruashi, $13m at Consolidated Murchison and $4m on a bankable feasibility study at Dilala East, another name for Musonoi, in DRC.
The payment of $35m towards Ruashi, will lower debt there to $100m, which, along with raising a minimum of $60m, he said, would trigger a revised debt package, giving Metorex this year as a debt repayment ‘holiday’ and cut its repayments to $16m every six months from $25m as it was then.
The $100m or R750m capital raising comes after the company raised R922m in 2008 in a highly dilutive rights issue that outraged shareholders and substantially weakened the share price.
The new capital raising meant Metorex’s balance sheet would be restored to health and the company would move into growth mode after a spell in survival mode, Goodlace said in January.
The offer in the form of a claw back was structured in a way that allowed the major shareholders owning 55% of the shares to put money into the rights issue. They oversubscribed, injecting $80m into the offer. The claw back shares have exactly the same rights as ordinary shares.
The offer was then thrown open to minority shareholders who could subscribe for their proportionate share in the offer.
The shares going to the minority shareholders would come from the excess held by the majority shareholders.
The offer is at R3.60/share in the ratio of 33.233 claw back shares for every 100 Metorex shares held on 19 March 2010. The offer closes in mid-April.
