Shares in Aurox Resources have jumped as much as 56 per cent today as the company amends its convertible notes terms for an early cash injection of up to $47 million and modifies its port agreement.
Shares in Aurox Resources have jumped as much as 56 per cent today after the company amended its convertible notes terms to provide for early conversion to shares and modified its agreement with the Port Hedland port authority.
Shares in Aurox came out of a trading halt today, and climbed 5.2 cents to trade as high as 14.5 cents. It closed local trading at 12.0 cents
Aurox today offered a cash incentive to its convertible note holders in a bid to prudently manage its capital in "difficult times".
The company said it will offer 25 cents cash for each note that is converted early and also issue one ordinary share.
Aurox currently has 50.33 million notes, each with a face value of 95c each and a maturity date of June 30 2010. The notes have a total value of $47.81 million.
The Subiaco-based company said it has reached agreement with institutional investors, who hold over 70 per cent of the notes, for early conversion.
Should all the notes be converted early, Aurox said it will pay a total of around $12.6 million for the cash incentive proposal.
Managing director Charles Schaus said the early conversion proposal is an equitable outcome for noteholders and the company alike.
"Removing the debt overhang of the Notes will make Aurox shares a more attractive investment and squarely puts the focus back on the Balla Balla [magnetite] project," he said.
Had the early conversion amendments not been made, Aurox said it would have had to pay $5 million in semi-annual interest payments until the note maturity deadline.
Meantime, the company and the Port Hedland Port Authority have agreed to vary the terms of the Utah Point facility agreement.
Official work on the new, $225 million public access berth at Utah Point started last week, with customers Aurox, Atlas Iron, BHP Billiton, Consolidated Minerals, HiTec Energy and Process Minerals International to contribute $105 million towards costs.
Aurox today said deadlines for the satisfaction of certain conditions, including regulatory approval and funding, have been amended.
Under the amended terms, Aurox has agreed to not to start shipments before March 1 2012 and to make pro-rata contribution towards power distribution costs.
"The revised arrangements preserve Company's access to the Utah Point facilities and allow further time to secure the funding necessary to advance the project and port arrangements," Aurox said.
"If the agreement's condition precedents have not been met by 31 March 2010, then the agreement terminates with neither party having any further liability, responsibility or obligation to the other."
Earlier this week, Aurox restructured its supplier arrangement for Balla Balla with Siemens AG.
It follows an announcement last year that the company was seeking to curtail engineering and procurement activities pending the outcome of full project funding.
The estimated capital cost of the project is around $1 billion.
At the end of the December quarter, the company had cash reserves of $28 million.
(An earlier version of this article incorrectly reported that Aurox would receive a cash injecton from the early conversion of its notes.)
The two announcements are below:
Aurox Resources Limited ("Aurox" and the "Company") announces that it proposes to amend the terms of its listed unsecured redeemable convertible notes (ASX Code: AXOG) ("Notes") to permit early conversion by noteholders ("Proposal"), with a $0.25 per Note cash payment to be made to noteholders who exercise the early conversion option.
As part of that proposal Aurox has reached agreement with institutional investors who hold over 70% of the Notes ("Institutional Noteholders") for the early conversion of their Notes.
Aurox's Managing Director Charles Schaus said, "The changes in financial markets and the global economy over the past year have had a profound effect on the ability of Aurox to advance the development of the Balla Balla project as originally intended.
Like many other resource companies, Aurox has had to review its strategy and operating activities to deal with a markedly different environment. The early conversion proposal is considered to be an equitable outcome for noteholders and the Company alike and a prudent approach to capital management in difficult times. Removing the debt overhang of the Notes will make Aurox shares a more attractive investment and squarely puts the focus back on the Balla Balla project."
The Company currently has outstanding approximately 50.33 million Notes, each with a face value of $0.95. The Notes mature on 30 June 2010. The terms and conditions of the Notes are regulated by a Trust Deed. Each Note is convertible by a noteholder into one (1) new ordinary share in the Company ("New Share") upon the occurrence of certain specified events prior to maturity.
The key financial terms of the Proposal are that conditional upon an amendment to the Trust Deed to permit early conversion of the Notes, the Company intends to invite all noteholders to convert their individual holdings of the Notes (on the existing basis of one New Share for every Note) on the same basis as the Institutional Noteholders. As such investors would have the option to convert their Notes and receive for each Note held:
- Cash of $0.25; and
- One ordinary share in Aurox.
As outlined above, the Company has reached agreement on the terms of the Proposal with institutional investors who hold in aggregate approximately 70% of the 50.33 million Notes. The Institutional Noteholders have agreed to the proposed amendment to the terms of the Notes, to submit a conversion notice once the proposed amendment becomes effective and that the New Shares issued to them will be subject to a voluntary escrow of six months from issue.
The issue of the New Shares will not require further shareholder approval or the issue of a disclosure document because the Notes were issued in August 2007 pursuant to shareholder approval under ASX Listing Rule 7.1 and a prospectus was lodged with ASIC.
The Notes have an aggregate face value of $47.81m and are redeemable on 30 June 2010. The semi-annual interest payments due until redemption, in aggregate, amount to $5.02m. If all the holders of Notes accept the invitation for early conversion, approximately $12.58m in cash will be paid by the Company and an aggregate of 50.33m New Shares will be issued.
The Company intends to extend the early conversion invitation to all registered holders of Notes shortly following the amendment to the Trust Deed becoming effective. The Company will announce the timetable to implement the Proposal once the Trust Deed amendment is effective.
Aurox was advised by Helmsec Global Capital Limited.
Aurox Resources Limited [ASX Code: AXO] ("Aurox" and the "Company") announces that the Company and the Port Hedland Port Authority ("PHPA") have agreed the terms for a variation of the Utah Point Facility Agreement between the parties.
In June 2008 Aurox announced that it had secured an agreement with the PHPA for long term access to the proposed Utah Point shipping facility, which included dewatering, stockpiling and ship-loading of Balla Balla iron concentrate. The term of the Agreement is 15 years.
On 13 March 2009 the State Government Minister for Transport, Mr Simon O'Brien and the Minister for Mines and Petroleum, Mr Norman Moore were on site as driving of the first pile started for construction of the wharf. In a media release Mr O'Brien said that the additional common-user berth was essential to meet the growing demands of current and emerging iron ore and other mineral producers. Completion and commissioning of the Utah Point berth was expected by mid-2010.
Aurox and the PHPA have agreed to vary the terms of the original Utah Point Facility Agreement to amend the dates by which the respective parties are required to satisfy certain conditions, including those related to regulatory approvals and funding. In consideration, Aurox has agreed not to commence shipments across the Utah Point berth prior to 1 March 2012 and also to make a pro-rata contribution towards power distribution costs, with such amount to be funded prior to the Company's first export shipment.
The revised arrangements preserve the Company's access to the Utah Point facilities and allow further time to secure the funding necessary to advance the project and port arrangements. If the agreement's condition precedents have not been met by 31 March 2010, then the agreement terminates with neither party having any further liability, responsibility or obligation to the other.