JOHANNESBURG (miningweekly.com) – Sierra Leone-focused iron-ore explorer London Mining on Wednesday announced that it had entered into a new $25-million debt facility with Standard Chartered Bank and FirstRand Bank that would provide the company with additional short-term working capital.
The facility would mature on November 30, with the option to extend to December 31, in the event of certain circumstances.
London Mining said the debt facility’s interest margin of 8.5% and arrangement fee were in line with the company’s existing secured debt facility.
The company had also agreed further fees of $35-million, of which $1-million was payable on the maturity of the facility and $2.5-million upon completion of the company’s strategic partner process that was currently under way.
London Mining noted that the process to secure a substantial investment by a strategic partner to reduce debt and fund future capital expenditure was progressing.
“Nonbinding indications of interest have been received from a number of industry parties, who have performed due diligence on a range of potential structures for the investment,” the company said.
Analysts at Liberum Capital stated that this suggested a “level of competitive tension in the bidding process”.
London Mining was targeting the completion of this process before the end of this year.
Meanwhile, as part of the debt arrangements, the company had also granted FirstRand Bank warrants over 2.77-million shares, representing 2% of the company’s existing share capital, plus additional shares to be issued if any new shares were issued during the exercise period pursuant to the exercise of currently outstanding share options, awards or convertible instruments.
The warrants had an exercise price equal to the nominal value of the shares and a three-year warrant exercise period and were subject to normal antidilution provisions.
Liberum commented that the cost of this debt facility was expensive, which suggested that London Mining’s management strongly felt the extra balance sheet headroom was necessary in the event of iron-ore prices falling further, or if its operations were impacted by wet season delays or other risks, such as Ebola.