Aquarius Platinum’s share price fell as much as 11.5 percent on the JSE yesterday after news late on Monday of a $225 million (R2.35 billion) plan to restructure its balance sheet, to be funded by a rights issue.
The restructuring means that the platinum producer will have access to new capital to develop its smaller projects.
It comes after the company restructured the Kroondal and Mimosa operations and mothballed the Everest and Marikana mines in the past two years due to financial constraints and labour challenges.
Aquarius shares recovered some losses later in the day, to close 7.44 percent down at R5.60.
The offer to buy back convertible bonds for cash represented recapitalisation that could provide a return to growth, Nomura mining and metals analyst Tyler Broda said in a note yesterday.
Aquarius launched the tender offer for a maximum of $225m and a minimum of $150m worth of bonds late on Monday. It said the offer would expire on Friday. About $138m in bonds have been pledged for tender from existing holders.
Following the completion of the tender, Aquarius plans a rights issue that will be partially underwritten for at least $150m and is expected on Tuesday next week.
Aquarius has $300m worth of convertible bonds that mature on December 18 next year, of which $298m is currently outstanding. The holders of these bonds were invited to sell them to Aquarius for cash.
“Greater stability and improved performance enables increased cash-flow generation, enhances the likelihood of Aquarius accessing debt financing, increases the board’s confidence in the business and its financial outlook and assists the board to plan capital requirements more efficiently,” the company said.
There had been no disclosure of the purchase price, and bondholders who had pledged to tender would receive an undisclosed fee, Broda noted.
He said the bonds had a yield maturity of 14.05 percent.
“The refinancing, in our view, is likely to remove the uncertainty over the company’s financial risk and avoid a scenario where unfunded liability grows in its impact as the payment date approaches,” Broda said in the note.
Aquarius, which has been unscathed by the 11-week wage strike on the platinum belt, was also likely to benefit from the stronger platinum price, the Nomura analyst said.
The company settled wage negotiations at its Kroondal mine with the National Union of Mineworkers in June last year, Broda noted.
About 70 000 Association of Mineworkers and Construction Union members are on strike at Lonmin, Impala Platinum and Anglo American Platinum.
Broda forecast that the Everest mine could be restarted in two years for $25m and could provide 150 000 ounces to 200 000 ounces of metal a year.
Platinum stockpiles are nearly exhausted and Nomura expected stronger prices similar to those early last year after the strikes in mid-August 2012.
“These strong prices especially in the stronger gold price environment that we forecast for the first half should provide material earnings upside for this lower-cost producer,” Broda added.