Shares in iron ore pellet producer Grange Resources fell after it unveiled plans to raise $167 million in new equity in a deeply discounted offer to key stakeholders including a Chinese investor.
Shares in iron ore pellet producer Grange Resources fell after it unveiled plans to raise $167 million in new equity in a deeply discounted offer to key stakeholders including a Chinese investor.
The capital raising comprises placements to major shareholders at a price of 29 cents per share to raise $29 million, compared to a share price close on Monday of 59 cents.
The offer also includes an underwritten one-for-one non-renounceable entitlement issue of about 495 million new shares to raise $124 million.
Shares in Grange had fallen 11 cents, or 18.64 per cent, to 48 cents by 1430 AEST on Tuesday after the capital raising was announced.
Grange also said in a statement on Tuesday that its debt liabilities would be "almost halved" after the raising.
Grange had $A33.4 million cash and cash assets at the end of June, and aims to extend a March 2010 repayment date for a $US40.8 million ($A49.4 million) letter of credit facility arranged by major shareholder Shagang International Holdings Ltd.
Shagang, China's largest privately held steelmaker, will maintain its 47.1 per cent stake in the company.
Grange said cornerstone shareholders, which include significant operators in the Chinese iron ore and steel sectors, would participate in the placements.
"The offer, placements and restructure will enhance Grange's cashflow outlook significantly and strengthen the company's balance sheet," the Perth-based company said.
Funds raised would be used as working capital for continued investment in the Savage River magnetite mine in Tasmania and to develop its $US1.6 billion ($A1.94 billion) Southdown magnetite mine at Albany in Western Australia's south.
"We are ... well placed to benefit from the future iron ore price outlook," Grange managing director Russell Clark said.
"This year's benchmark settlements are the second highest on record, and we are already receiving numerous enquiries to purchase spot product at a significant premium to the current benchmark."
Mr Clark dismissed suggestions the share price had dropped because investors did not like the deep discount of the placement.
"I'm actually quite prepared to blame it on the GFC (global financial crisis)," he told a teleconference on Tuesday.
The capital raising also includes an underwritten one-for-one non-renounceable entitlement issue of about 495 million new shares to raise $124 million.
Mr Clark said the retail offer was "well oversubscribed" and was restricted to parties with registered addresses in Australia, New Zealand and the British Virgin Islands, "so we're not actually expecting a lot of Chinese input".
"They would need special approvals," Mr Clark said.
Steel trader and 7.7 per cent Grange shareholder Stemcor will be issued 55 million shares under the deeply discounted placement.
Stemcor will also be paid $US34.6 million ($A42 million) in cash in return for reducing a royalty payment from 10 per cent of gross revenue receipts from Grange's Savage River operations in Tasmania to two per cent.
Mr Clark said the royalty payments were "particularly onerous" and were consideration to Stemcor, which previously owned Savage River along with Shagang, as part of Grange's merger with Australian Bulk Minerals in January.
Conditions of the placement to Shagang include completion of the Stemcor placement and the rights issue.
