Cashed-strapped copper and zinc miner Kagara has announced a capital raising of up to $262 million, while a Chinese firm is set to take a 19.9 per cent stake in the miner.
Kagara said today that it intends to raise a minimum of $150 million and a maximum of $262 million through the issue of new shares to existing and new shareholders.
The offer includes a placement of 38 million new shares to sophisticated investors for 60 cents per share, raising about $23 million, a non-renounceable entitlement offer to institutional shareholders of about $85 million, and a non-renounceable entitlement offer to retail shareholders to raise up to a maximum of about $92 million.
The entitlement offer is underwritten to the first $127 million by Macquarie Capital Advisers and Southern Cross Equities.
The Chinese firm, Guangdong Foreign Trade Group, through its wholly owned subsidiary, Goldsland Holdings Company, has agreed to invest $62.5 million or 15 per cent of the company post the offer by purchasing shares at the offer price of 60 cents.
As well, Guangdong may subscribe after the offer for additional shares to increase its holding up to 19.9 per cent at a price of 80 cents per share, which may raise up to an additional $34 million.
Guangdong has agreed to provide Kagara with a short term funding loan of $10 million, subject to the approval of Kagara's banks.
Kagara chairman Kim Robinson said the equity raising would enable Kagara to significantly reduce its existing debt, strengthen its financial position, and provide a solid foundation on which to take advantage of the company's assets.
"We look forward to delivering value to all Kagara shareholders by further developing Kagara's existing assets and pursuing future opportunities," Mr Robinson said.
"The creation of this strategic alliance with Guangdong is expected to deliver a range of mutually attractive opportunities and provide Kagara with strong potential to access development capital from offshore."
Kagara also said it had received approval from its bankers, Westpac and NAB, to extend the maturity of the remaining $60 million of outstanding loans from October 2009 to July 2010, subject to successful completion of the Offer, and the repayment of $90 million of its bank loans, in addition to standard bank terms and final documentation.
If Kagara raises more than $170 million in the offer, half of the extra funds must be used to retire bank debt.
Any investment by Guangdong is subject to the approval of the Australian Foreign Investment Review Board and the Chinese National Development and Reform Commission.
AAP
