18/02/2014 - 08:02

Western Areas to raise $104m for debt reduction

18/02/2014 - 08:02


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Western Areas is looking to raise $104 million to reduce debt and provide greater financial flexibility after a positive half-year report which saw the nickel miner turn a big loss to a modest $2.7 million net profit.

Western Areas to raise $104m for debt reduction
Western Areas managing director Dan Lougher.

Perth-based nickel miner Western Areas will seek to raise up to $104 million to provide greater flexibility in paying back $235 million worth of convertible bonds, the last of which is due by July next year.

A placement of approximately 29.5 million ordinary shares at $3 per share, worth $89 million, will be followed by a share purchase plan to raise an additional $15 million.

The placement will be fully underwritten by Macquarie Capital and UBS AG as joint lead managers.

The first convertible bond payment is due on July 2 this year for a total of $110 million.

The second bond payment of $125 million will be due on July 2 2015.

Following the capital raisings, Western Areas expects it will have more than $300 million available in facilities and cash after the first bond repayment.

"Ultimately these raisings will be accretive to our shareholders with improved free cash flow and earnings expected going forward," Western Areas managing director Dan Lougher said.

"Western Areas has displayed exemplary consistency with delivery of operational results and with renewed balance sheet strength we've enhanced our ability to consider minor capital projects designed to improve productivity."

Mr Lougher said the company wanted to achieve in excess of 90 per cent mill recovery through tank leaching, with engineering studies to commence in the next quarter.

"Early estimates indicate capital expenditure between $15-20 million with a three-year payback," Mr Lougher said.

The company has also updated its corporate loan facility with ANZ Banking Group.

In March 2013, Western agreed for the facility to mature in March 2016, however this has now been extended to March 2017.

"Shareholders would be aware that the company has a long-standing and successful relationship with ANZ that has seen our banking facilities be amended and extended to our benefit over many years," Mr Lougher said.

"The anticipated extension to March 2017 is another example of this beneficial relationship and shareholders can expect in 2015 or 2016 that we may renegotiate again depending on prevailing circumstances."

Half-year end

In its half yearly report Western Areas posted a net profit after tax of $2.7 million, a turnaround from the $96.2 million loss from the same time last year.

The return was achieved with a drop in sales revenue to $143.4 million for the half.

Mr Lougher said it was satisfying to be one of the few nickel mining companies in the world to report a profit.

"The standout financial measure for the half was the $19.2 million in free cash flow we generated, which was a $24.4 turnaround from the previous half," he said.

"The quality of our assets and how the team at Forrestania manage them on a daily basis drives these results.

"The most pleasing outcome of these efforts was a reduction in our unit cash cost of production by 10 per cent to $2.41."

The company has also declared an interim fully franked dividend of 1 cent per share, representing a $2.3 million payout.

Shares in Western Areas are in a trading halt as of this morning, at $3.28 per share.




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