18/01/2016 - 13:26

Sundance cuts jobs, plans $16m raising

18/01/2016 - 13:26

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Shares in iron ore hopeful Sundance Resources were stripped of half their value after the company announced an aggressive cost reduction strategy that includes job cuts and a reduction in board size and remuneration.

Sundance cuts jobs, plans $16m raising
Sundance has faced multiple delays in the development of its Mbalam-Nabeba iron ore project in Congo.

Shares in iron ore hopeful Sundance Resources were stripped of half their value after the company announced an aggressive cost reduction strategy that includes job cuts and a reduction in board size and remuneration.

Sundance has also announced a discounted renounceable rights issue in order to settle legal claims against geologist David Porter and Absolute Analogue Incorporated, which total $11.5 million.

The company has appointed Patersons Securities to lead manage a one-for-one rights issue at 5 cents per share to raise up to $16.5 million, with Mr Porter to sub-underwrite $11 million and Patersons (or parties associated with Patersons) to underwrite a further $3 million.

A total of $500,000 will be paid in cash to Mr Porter and AAI upon lodgement of the prospectus, which is expected to occur next week.

The raising was priced at a 41.1 per cent discount to Sundance’s last closing price of 1.2 cents per share (in late December).

Sundance shares exited a trading halt today, closing 50 per cent lower to 0.6 cents each.

“The rights issue will allow Sundance to settle the disputes with Mr Porter and AAI and all related obligations, and put in place additional working capital which is expected to see the company through until early 2017 following a significant cost reduction exercise currently being undertaken,” Sundance said in a statement.

The company is targeting an 80 per cent reduction in costs, and will be carried out by “significantly” scaling back its workforce, overheads and activities in Perth, Cameroon and Congo, as well as reducing the size of the board and the remuneration of the remaining board members.

No details have been released in regards to the number of workforce cuts or which board members will be stepping down.

Sundance managing director Giulio Casello said the Chinese EPC contractor for the company’s Mbalam-Nabeba iron ore project would want to move ahead as soon as it could, but exact timing was unclear.

“Therefore, given the pathway to construct the port and rail infrastructure is currently postponed (as announced last week), Sundance’s ability to find an equity partner and complete the required funding of the mine and associated infrastructure is also delayed,” Mr Casello said.

“Consequently, it is important that the company takes swift action to protect its assets and place itself in the best position to advance the project as and when conditions allow.

“The support of our shareholders and convertible note holders is most important and we firmly believe the settlement with Mr Porter, the equity raising and cost reduction measures are in their best interests and will provide a platform for Sundance to continue whilst the resolution to the EPC is progressed.”

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