Diversified miner RNC Minerals on Monday said that it would withdraw $12-million in capital from the Dumont joint venture (JV), in lieu of the debt extension and equity raise that it announced at the end of May.
CEO Mark Selby explained in a news release that the cash withdrawal would avoid an equity dilution and that it would allow a significant reduction in RNC's debt with the elimination of the majority of its debt payments in 2018.
“With the improved visibility from the Beta Hunt sale process, we believe that the value of the debt extension announced on May 31, 2018 has been reduced,” he commented.
The company plans to use the proceeds of the sale of the Australian asset to repay debt.
The cash withdrawal and the planned sale of Beta Hunt would eliminate a significant portion of RNC's debt and fund the majority of the company's debt repayments due in 2018, RNC stated.
The company is left with $4-million in the Dumont JV with private equity firm Waterton, which it believes will be sufficient to fund its share of expenditures to get the cobalt/nickel project to a construction decision.
RNC currently owns 50% of the Dumont JV, which in turn holds the Dumont nickel/cobalt project. In order to obtain the withdrawal of these funds, RNC has agreed to remove the Dumont project conversion cap under the $10-million convertible note entered into by RNC and Waterton in June 2017. As a result, if these conversion rights are exercised by Waterton for additional units of the Dumont JV, RNC's interest would be diluted to about 28%, as compared to 40% under the prior terms of the convertible debenture, assuming that Waterton converted the full $10-million in principal and RNC repaid $5.5-million of the convertible note in cash.
If RNC were diluted to about 28% of the Dumont JV, it would retain its right to act as manager of the Dumont JV, but would no longer hold veto rights on certain fundamental JV matters or the ability to trigger certain exit rights included in the current JV arrangements.
The project is located in the Abitibi region of Quebec and contains the largest undeveloped nickel and cobalt reserves in the world.