Iron ore miner African Minerals announced on Tuesday what it termed as “the successful closing of the book and pricing of US$350 million of Convertible Bonds due 2017 (the “Bonds”)”.
The Company disclosed that it “intends to use the net proceeds of the Offering primarily for the continued expansion of production at its Phase I Tonkolili iron ore operation to 20Million tpa” from 1.3 million tonnes of “saleable” ore indicated in 2011.
AML also stated that Standard Bank, Deutsche Bank and Dundee Securities a full service investment dealer engaged in wealth management, financial advisory services, retail brokerage, institutional sales & trading, equity research and investment banking were appointed “joint global coordinators” for the convertible bond offering and the London Branch, are acting as “joint book runners”.
The company made public the role of Standard Bank Plc, Deutsche Bank AG, London Branch, Dundee Securities Ltd., GMP Securities and Mirabaud Securities as “joint placement agents” on the Offering.
Dundee Corporation it appears is interested through its “affiliates” in 20% of the commissions payable to the Placing Agents, to be paid to Dundee Securities Ltd, another affiliate of Dundee Corporation, under the Placing Agreement, and an investment by Dundee Resources of up to $30 million in the Convertible Bonds.
The bonds were also announced alongside a $518 million loan to “refinance an existing $417.7 million facility on improved terms”.
African Minerals, Reuters reported, said last week it was in “advanced discussions over financing for the Tonkolili expansion”, adding that “it brought forward planned spending on the project into the first half of 2012 in order to benefit from a resilient iron ore price”. This can properly position the Iron ore miner to “obtain the necessary equipment quickly and keep on current contractors”. Spending will finance the buying of additional locomotives and rail infrastructure to increase capacity.
The 2017 bonds, to be issued are expected to have a coupon of 8.5 percent paid semi-annually, with the conversion price set at $10.98 — 700 pence at the current exchange rate based on an issue size of $300 million, which the ore miner said “may be increased by up to $50 million, if the bonds convert they will represent 27 million shares, or roughly 8 percent of the current shares in issue”.
The miner said it was also “progressing towards the completion of a planned $1.5 billion investment by Chinese steelmaker Shandong Iron and Steel Group, which will take a 25 percent stake in Tonkolili”, and was “highly confident of a successful conclusion to that process”.
Commenting on the closing of the financing package, AML Executive Chairman, Frank Timis said: “It is pleasing to see such strong demand for the Bond from both existing shareholders and lenders. This US$868m finance package will provide us with the funding required to accelerate our expansion towards 20Mtpa, to maintain the current momentum in the project, and to benefit from favourable commodity markets. I also remain confident that the US$1.5Bn Shandong Iron and Steel Group transaction will be completed successfully.”
Chief Financial Officer, Miguel Perry also stated that he is “pleased to have managed to refinance the Secured Loan Facility with a more attractively priced, and more flexible, facility, with Standard Bank being a key supporter in this process. The availability of funding at competitive terms from the bank market is a clear endorsement of both the Company’s prospects and those of Sierra Leone.”
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