Ormonde Mining PLC - Proposed Disposal
This announcement contains inside information
("Ormonde" or the "Company")
Proposed disposal of Ormonde's 30% interest in the
Ormonde announces that it has entered into a conditional Sale and Purchase Agreement ("SPA") for the disposal of the Company's 30% interest in
Summary of the reasons for and terms of the proposed Disposal
· Low initial ore grades and delays to accessing the main orebody, reported by the Mine's management team and disclosed by Ormonde in recent announcements, have resulted in overall mine production and related revenues being substantially lower than the 2012 feasibility study forecasts for the current stage of ramp-up, which, when coupled with accelerated waste mining and the related increase in mining costs, have led to additional funding requirements for the Mine;
· An additional debt financing of
· As announced by Ormonde on 25th
· This new funding requirement is set against a backdrop of weak tungsten prices, with benchmark prices of ammonium paratungstate ("APT") currently quoted at
· Having assessed investment risks, market factors, debt levels and the impact of various financing scenarios on Ormonde's interests, Ormonde has agreed to sell its 30% interest in
· Under the SPA, OCM Luxembourg Tungsten Holdings SARL, a wholly owned subsidiary of Oaktree, will pay
· Ormonde shareholder approval at an extraordinary general meeting ("EGM"), to be held on 12th
· The Ormonde Board of Directors (the "Board") considers a cash exit from the Company's minority interest at this time to be in the best interest of Ormonde shareholders ("Shareholders") under current circumstances and intends to unanimously recommend the Disposal to Shareholders;
· Should the Disposal not take place, Shareholders should be aware of the possibility that Saloro SLU ("Saloro") could become in default under the terms of its debt financing by Oaktree (and require a waiver from Oaktree), and the security given by Ormonde over its shares in
Commenting on the Disposal,
"While the disposal of Ormonde's interest in the
Having assessed the options open to Ormonde to address this funding requirement, in light of the performance of the Mine to date, the current tungsten market, difficulties or risks in raising capital and the potential consequences for Ormonde were its share of funding not to be provided, the Board has determined that a sale of its interest in the
Background to and reasons for the Disposal
The Mine is operated by Saloro, a Spanish company controlled by Oaktree through its 70% interest in the
Following an improvement in performance once Pit 2 reached fresher and higher grade ore, as mining operations progressed northwards from Pit 2 towards the main orebody, old, backfilled mine workings were encountered where near-surface, high grade tungsten mineralisation had been modelled and therefore expected.
These factors have resulted in overall mine production and related revenues being substantially lower than the 2012 feasibility study forecasts for the current stage of ramp-up, which, when coupled with additional mining costs, due to the necessity to accelerate waste mining to access higher grade ore sources, have led to additional funding requirements for Saloro and the Mine.
Additional funding requirements
As announced on 17th
Despite the recent debt financing and the commencement of concentrate sales, management of Saloro indicated to the joint venture partners, Ormonde and Oaktree, that the 2020 budget for Saloro's continued operations, based on updated mine plans, foresees a further cash shortfall around the end of February or during
Assessment of Ormonde's options
Following Saloro management's recent tabling of updated mine plans, proposed 2020 budget information and considering the related Funding Requirement, Ormonde and Oaktree immediately engaged in discussions to establish the implications for the Mine and the manner in which the Funding Requirement might be met. In tandem with these discussions, Ormonde's Board has assessed all options available to the Company and their impact on Shareholders' interests. These options can be best summarised in three possible scenarios.
Firstly, the Board, with the assistance of its advisers, assessed the possibility of raising capital to contribute Ormonde's share of the Funding Requirement, and has determined it would be highly uncertain given the current performance of the Mine and market conditions, and likely highly dilutive to existing Shareholders. The Board concluded from its assessments that such a funding, even if it were possible, would not be in the interest of existing Shareholders.
Secondly, in a scenario where Oaktree agreed to provide the full Funding Requirement, Oaktree indicated that a debt-for-equity restructuring of Saloro's accumulated debt would have been completed around the same time. This would have inevitably resulted in a large dilution of Ormonde's interest, substantially reducing any future upside to Ormonde from the
Thirdly, the Board assessed the proposed cash exit from the Company's minority interest in the Mine, taking account of the ore losses to date, high and rising debt levels, the tungsten price environment, accelerated mining rates to deal with these impacts, together with the potential risk and returns from the other scenarios, and has determined that this would be in the best interest of Shareholders under current circumstances.
· a waiver of the
· a waiver in relation to the deferred portion of management fees which had accrued to Ormonde over the 2017-2019 period, totalling
each of which have been waived by Oaktree and Ormonde, respectively, resulting in a net additional benefit to Ormonde of
Shareholders should be aware that if the Disposal does not take place, it is possible that Saloro could become in default under the terms of its debt financing by Oaktree (and require a waiver from Oaktree). In such event, the security given by Ormonde over its shares in
The Board will therefore be unanimously recommending that Shareholders approve the Disposal at the upcoming EGM.
Additional details of the Disposal
· Ormonde's investment in
· The value of the associate investment on the Company's balance sheet as at 30th
The Disposal constitutes a fundamental change in business of Ormonde pursuant to Rule 15 of the AIM Rules and Rule 5.20 of the Euronext Growth Rules and therefore requires the approval of the Shareholders at an EGM of the Company. A circular, which will contain further details of the proposed Disposal and use of sale proceeds and a notice of EGM containing resolutions to approve the Disposal, will be posted to Shareholders in mid-January and will also be available on the Company's website at http://ormondemining.com/. The EGM is expected to be held at the
Tel: +353 (0)1 8014184
Davy (Nomad, Euronext Growth Advisor and Joint Broker)
Tel: +353 (0)1 6796363
Tel: +44 (0)20 3 470 0470
This information is provided by RNS, the news service of the
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