Fortis to raise $236m from Chinese investors for potash mines

PERTH (miningweekly.com) − Minerals explorer Fortis Mining has secured some $236-million from Chinese investors to buy and develop two potash mines in Kazakhstan for $260-million.

Subject to the necessary approvals, Fortis would raise the $236-million from separate initial issues of ten-million shares and 12-million convertible notes, followed by a later separate issue of 30-million shares and 160-million convertible notes.

Fortis announced in February that it would buy the Chelkar and Zhilyanskoe potash salt deposits, after signing a binding heads of agreement with the project owners. The Melbourne-based company would buy a 75% shareholding in Ji’an Resources, which ultimately owns the projects.

The Chelkar deposit is estimated to host some one-billion tons of baron oxide, almost six-billion tons of potassium oxide, and around one-million tons of magnesium oxide. The Zhilyanskoe deposit is estimated to host some 545-million tons of potassium oxide, and around 112-million tons of potassium chloride.

Potash is mainly used in fertilisers.

“Fortis Mining today officially becomes a global force in the potash industry,” said chairperson Jitto Arulampalam.

He added that the institutional investors, based in Hong Kong and China, were fully supportive of its growth plans.

FUNDING

The first ten-million shares would be issued at $1,60 a share, and funds raised would be used to fund further exploration costs in Australia, and to support general working capital costs, including transaction and due diligence costs associated with the proposed acquisition of the Chelkar and Zhilyanskoe potash mines.

The funds would also seek be used to partially fund the second tranche payment of $24-million, payable for the proposed acquisition of the mines.

Fortis would also shareholder approval to issue the 12-million convertible notes, which would have a face value of $1 each, and would expire in April 2012. Two convertible notes would be convertible into one Fortis share, with the company willing to issue six-million shares.

The next 30-million share issue, was aimed at raising some $48-million, with the funds used to acquire the Chelkar and Zhilyanskoe potash mines, as well as for working capital costs associated with the acquisition.

The second set of convertible notes would have a face value of $1 each, and would raise some $160-million before costs. Fortis said that 100-million of the notes could be converted into Fortis Mining shares, at a conversion ratio of one share for every two notes.

The remaining 60-million notes could be converted into Fortis shares at a conversion ration of one share for every three notes held.