THE BOURSE WHISPERER: Gindalbie Metals (ASX: GBG) has reached agreement in principle, subject to the conclusion of a Binding Memorandum of Understanding, with its Joint Venture partner Ansteel.
The deal entails the implementation of a funding solution to meet the additional working capital requirements for the Karara project that have come into play following recently-announced delays in ramping up production.
The US$230 million funding package will be provided in two stages: first, through a concentrate pre-sale agreement; and secondly, through a loan facility to be provided by Bank of China – and guaranteed by Ansteel.
Subject to various regulatory approvals, Ansteel will be granted the option to subscribe for new equity in Karara Mining Limited (KML) to provide KML with sufficient funds to repay these loans.
“If Ansteel elects to convert the entire amount into equity, based on current exchange rates, it would increase its stake in KML to approximately 62 per cent, with Gindalbie retaining approximately 38 per cent ownership,” Gindalbie Metals said in its ASX announcement.
“After assessing the alternative of Gindalbie raising new equity to maintain its ownership interest in KML, the Board of Gindalbie has decided that the Ansteel funding solution represents by far the best option for shareholders, as the dilutionary effect of the issue of new GBG shares under an entitlement offer at the current market price would be far greater than the impact on Gindalbie shareholders of issuing new KML shares to Ansteel.”
Gindalbie said the Ansteel funding solution will result in the company being cashed up, debt-free and well placed to take advantage of future opportunities while still retaining a significant stake in the Karara project.