Copper 360 proposes R1.15bn rights issue to restructure debt and boost growth

JSE-listed Copper 360, which operates in the Norhtern Cape. has proposed a R1.15 billion rights issue and a restructuring of its debt.

The mining company said in an announcement to shareholders on Friday that it was in the process of restructuring, aiming to raise sufficient funding for short- and medium-term growth, reduce the debt burden to improve profitability, and mine several orebodies with achievable growth potential.

The share price slipped 1.4% to 70 cents on the JSE on Friday, well down from R3.25 that it traded at a year previously. Copper has surged onto the prospects of many mining groups due to raising demand for the metal in renewable energy technology, AI and data centres and due to its use in urbanisation and in infrastructure.

Copper 360's directors said the company is transitioning from an exploration company to a copper-producing junior miner, which requires additional capital.

The capital from a claw-back offer and the rights offer will enable the sustainable long-term profitability of the company and provide the capital required to grow in stages, reaching 40 000 milled tons per month in 12 to 18 months, and then to 60 000 milled tons per month within 24 months.

A number of agreements to recapitalise the company have been entered into, as well as the restructuring and conversion of long-term debt instruments on its balance sheet, and the reduction of revenue-based royalty payments.

In terms of these agreements, the company will undertake a R1.15bn rights offer at an issue price of 50 cents per ordinary share. The rights offer will comprise new equity of R400 million and the debt conversion to a maximum of R750m.

The R1.15bn of new ordinary shares will be offered to existing shareholders through a combined claw-back offer and rights offer.

In addition to an underwriting commitment, undertakings have been received to subscribe to the rights offer for an additional R90m.

The equity capital raise would result in the issue of 800 million new ordinary shares.

The company has historically issued various debt instruments and instruments with preferential rights to cash flow: Class A Preference Shares, Class B Preference Shares, Class C Preference Shares, Copper Notes, Royalty Notes, Shareholder Loans, SHIP Founders Royalty, and 3 Plant Royalty.

The company has reached agreement with the debt instrument holders to convert the debt instruments in return for the issue of ordinary shares. The debt conversion will result in the issue of a maximum of 1.5 billion new ordinary shares.

As rationale for the debt conversion, the company said its balance sheet had been heavily geared for some time, and the level of gearing and the funding cost of the debt instruments were unsustainable, making the ordinary shares unattractive as an investment.

The restructuring of the debt instruments would create a stronger balance sheet, geared for growth, and result in a simplified capital structure, with the rewards of profitable trading largely falling to ordinary shareholders.

Proceeds from the first recapitalisation subscription would provide the company with sufficient funding to complete the development of the Rietberg mine and commence the start-up of a second mine. It also allows for the completion of the second modular flotation plant, which would create total processing capacity of 40,000 milled tons per month.

The conversion of the debt instruments would result in a balance sheet with modest gearing. The additional equity secured from the rights offer would create capital adequacy and would be available for further mine development, including the building of a third modular flotation plant.

BUSINESS REPORT