03/03/2009 - 09:34

Albidon suspends mining at Munali

03/03/2009 - 09:34

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Shares in Albidon have slumped as much as 43 per cent as the nickel miner places its Munali operation on care and maintenance and lays off some 350 employees and contractors.

Shares in Albidon have slumped as much as 43 per cent as the nickel miner places its Munali operation on care and maintenance and lays off some 350 employees and contractors.

Additionally, Albidon revealed an alternative capital raising proposal with 18.4 per cent shareholder and offtake partner Jinchuan after a $US26 million ($A40 million) deal fell through.

Last week, the miner placed its shares on hold as it revealed that the $US26 million capital raising with Pacific Road Resources Fund was "unlikely" to go ahead.

Shares in the company today fell 3.1 cents or 43.06 per cent to a low of 4.1c before rising to settle at 4.6c at 11:28 AEDT.

Albidon said the proposed funding with Jinchuan will take place in three tranches with the first comprising of payments totaling $US1.8 million, which will be used to place the Zambian mine in care and maintenance as a result of depressed nickel prices.

The second tranche will see Jinchuan subscribe to $US7 million worth of shares priced at eight cents each, with the funds to be used for working capital.

Tranche three will comprise of a convertible note facility at 10 cents per share with a coupon equivalent to the interest rate on Jinchuan's $US15 million subordinated debt.

Albdion said the tranche three funds will be used for working capital and possibly limited mine development.

The proposed capital raising is conditional on a number of items including agreemtn with secured and unsecured creditors, due diligence and board and shareholder approval.

"The Jinchuan proposal allows Munali to be placed on care and maintenance and thereby minimizes cash burn and nickel resources while nickel prices are low," Albidon said.

"There is also a willingness to continue decline development during care and maintenance which will put us in a position to start operations at economical prodiction rates."

Albidon added that as a result of the mine closure, around 350 employees and contractors will be made redundant and major supplier will be offered settlement proposals.

Additionally, Albidon has held talks with the Zambian government and local community leaders regarding the impact of the mine closure and has briefed senior lenders.

The suspension of mining and processing activities comes some seven months after first production started in July last year.

In December last year, the company started a review of its operations following substantial falls in commodity prices and had slashed the number of its employees from 260 to 150.

It also closed its Cape Town and Lusaka offices while the Perth office was downsized and relocated to share premises.

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