[miningmx.com] — FIRST Uranium has spelled out the possible consequences should shareholders reject the sale of the company’s key assets, saying the cost of survival would outweigh any benefit from keeping the company as a going concern.
In commentary accompanying an announcement on Tuesday that circulars on the sale of Ezulwini and Mine Waste Solutions has been posted to shareholders, First Uranium said the combined offers of $405m for the assets, from Gold One International and AngloGold Ashanti respectively, were the best on the table following a process where 20 parties were invited to submit bids.
“Ultimately only AngloGold, Gold One and one other party signed confidentiality agreements and undertook due diligence on the Corporation,’ the announcement read.
First Uranium intends to use the proceeds of the sale to service debt totalling around C$320m, of which $150m matures end-June and the remaining portion in April next year. The $150m can be converted into shares, while the remaining $170m is secured against the assets of Ezulwini and Mine Waste Solutions.
Shareholders, some who bought in at $1 per share the last time First Uranium did a fundraising in March 2011, could realistically expect no more than $0.11 in distributions. A significant portion among minorities have for this reason indicated they would oppose the deals, saying both Gold One and AngloGold’s offers were too low.
First Uranium, which until now has kept mum in the face of shareholders’ criticism, sketched several possible scenarios which may unfold should the sales be halted:
“The corporation may not be able to comply with certain BEE requirement in South Africa which may have a negative impact on its ability to maintain all of its mining rights,’ read the first scenario.
“If the corporation is required to comply with BEE legislation, additional dilution of up to 26% of its existing shareholders may result.’
First Uranium originally had derived its BEE credentials from the 25.5% stake which was held by Simmer & Jack. Following the sale of this holding to Village Main Reef and then AngloGold Ashanti (19.79%), First Uranium started negotiations with Vulisango in August 2011 with the view to conclude a BEE transaction. In Tuesday’s announcement, however, First Uranium said these talks have been called off.
In another scenario, First Uranium said existing shareholders would hold no more than a 16% stake in the company should a default on the $150m debt, end-June, result in the conversion of the outstanding money into shares. The company’s current market cap is $23m.
“If shareholders fail to approve the issuance of additional common shares to satisfy debentures ($150m debt), the corporation will be unable to satisfy the debentures at their maturity on June 30, 2012 and will default thereunder,’ read the notice.
“Cross default terms in the notes ($170m debt) and in respect of other secure lenders provide the secured lenders the right to realise on all assets of the corporation, with the result there will be no recovery for shareholders.’
Should shareholders dismiss the deal for MWS, it would automatically block the sale of Ezulwini as well. However, the sale of MWS can go ahead without approval for the Ezulwini deal, but First Uranium said it would still not have sufficient funds to service all debts, as well as a $10m bridge loan payable to Gold One.
“If the resolutions put forward at the meeting are not approved and the corporation is unable to satisfy its obligations under the debentures.or repay the Gold One bridge loan when due, the corporation may not be able to continue as a going concern.’
Voting is scheduled for June 15.
