Albidon secures $25m, cuts debt in half

Nickel miner Albidon is set to slash its net debt by half after securing $25 million in funding and the conversion of an $8 million subordinated debt.

The West Perth-based firm said its major shareholder, China's Jinchuan Group, has agreed to subscribe to $US5 million ($7.8 million) worth of shares, priced at a premium of A40 cents apiece.

Albidon last traded at 25c at 14:00 AEDT, unchanged from yesterday's close.

Jinchuan has also agreed to convert its $US5 million ($A8 million) subordinated debt to 10 million Atlas shares at 78c each. The conversion reduces Albidon's subordinated debt to $US15 million.

Albidon said on completion of the Jinchuan transactions, the Chinese company will hold an 18 per cent interest and will have the right to nominate one representative to the Albidon board.

Meanwhile, Albidon has raised a further $US4 million ($A6.2 million) through two placement agreements with funds managed by a UK-based equity fund.

Each of the funds have subscribed for 7.8 million shares at 40c apiece.

Additionally, Albidon has closed out its hedge book of 11,294 tonnes of nickel generating net proceeds of $US50 million.

"The proceeds are being used to decrease its senior debt from US$80 million to US$40 million with the remaining amount being made available for use at the Munali Nickel Project (approx. US$7 million) and payment of senior debt interest and fees (approx. US$3 million)," Albidon said.

"The equity funds raised (US$9 million) and the remaining cash from the hedge proceeds (US$7 million) will provide additional working capital during commissioning of the Munali Nickel Project as it ramps up to steady state."

The announcement is pasted below:

The Company is pleased to announce it has entered into a Subscription Agreement to place 19,469,750 shares at A$0.40 or US$0.26 to Jinchuan Group Limited ("Jinchuan") to raise US$5 million (A$7.8 million). The Company and Jinchuan have also entered into a Conversion Agreement to convert US$5 million of subordinated debt by issuing 10,000,000 ordinary shares at $A0.78 or US$0.50 to Jinchuan thereby reducing the Company's subordinated debt to US$15 million. Receipt of funds requires foreign currency clearances.

On completion of the above transactions, Jinchuan will have the right to nominate one representative to Albidon's Board of Directors and will hold 18% of the Company's issued capital.

Jinchuan is Albidon's offtake partner and a major shareholder. Jinchuan is China's largest producer of nickel, cobalt and platinum group metals and is a large producer of copper. Jinchuan's current nickel production is approximately 100,000 tpa. The investment in the Munali Nickel Project is a clear indication of Jinchuan's continued support of the Project and of the Company.

US$4 Million Placement

Albidon has also entered into two subscription agreements with funds managed by a large UK based equity fund. Each of the funds have subscribed for 7,787,900 shares at US$0.26 to raise US$4 million (A$ 6.2 million).

The funds which hold shares in Albidon are managed by a specialist manager of emerging markets equities for global institutions.

The shares under the Subscription and Conversion Agreements will be issued in two tranches. Up to 24.7 million shares can be issued in the first tranche and will be issued under the Company's ASX 15% placing facility. The second tranche of shares will be issued subject to shareholder approval at a meeting to be convened shortly.

US$7.0 Million Hedge Proceeds

As announced on 22 September 2008, the Company closed out its hedge book of 11,294 tonnes of nickel generating net proceeds of US$50 million. The proceeds are being used to decrease its senior debt from US$80 million to US$40 million with the remaining amount being made available for use at the Munali Nickel Project (approx. US$7 million) and payment of senior debt interest and fees (approx. US$3 million).

The equity funds raised (US$9 million) and the remaining cash from the hedge proceeds (US$7 million) will provide additional working capital during commissioning of the Munali Nickel Project as it ramps up to steady state.

In addition to the cash injection, these transactions reduce interest charges and significantly improve the Company's balance sheet.

The Company will be issuing an operational update on the Munali Nickel Project shortly.