[miningmx.com] — GOLD One International announced on Monday that none of the mining junior’s bond holders has exercised a once-off put option to redeem bonds for cash.
Gold One will therefore no longer require the debt facility it negotiated in October with Absa Capital and BNP Paribas to fund the $62m redemption value of the bonds.
As a result, holders will retain their bonds with a view to either converting them to shares, or redeeming those at maturity in December 2012 for cash.
The terms of the debt facility were previously viewed as a potential drag on the company. Imara SP Reid analyst Percy Takunda earlier said Gold One’s shares could come under pressure if the debt facility carried unfavourable terms.
“Modder East (Gold One’s flagship mine) will in our view be a very lucrative mine and will likely be cash positive this year, but the $65m facility will be carried by Modder East alone,’ Takunda stated in research released in October.
“We do not know what the full terms of the facility will be, but if at a minimum it is R40m per year and add to that a possible 20% hedge on production, we are inclined to sit on the side of caution.’
Analysts at Perth-based Hartleys concurred, saying in a research update following Monday’s announcement the decision is a major reduction in financial risk for the company as there will be no bank debt or hedging as previously expected.
“We see this as an outstanding outcome for the company as Gold One will not require the debt facility,’ Hartleys said. “The use of the bank debt would have increased Gold One’s financial risk, as the covenants placed on the bank debt would have been far stricter than those of the convertible bonds, as well as somewhat limiting the ability to use the company’s cash.’
Gold One said the terms of the convertible bonds will remain unchanged, with interest of 8.5% per year payable quarterly in arrears and a redemption value of 109.6% of the nominal value – unless converted into Gold One shares.
If all bonds were to be converted to Gold One shares, there would be an additional 157 million shares issued. This equates to an additional 20% of issued capital, on top of the current 806 million ordinary shares already on issue.
“Given that the bondholders are receiving an 8.5% coupon, we do not expect them to convert to shares in the short term,’ said Hartleys.
“Based on our estimates, the company should have over A$120m in cash at that point in time (December 2012), well in excess of the amount required for the bonds.’
