Minara’s Resources’ major shareholder, Swiss trading giant Glencore International, could very well tighten its grip on the Western Australian lateritic nickel producer if other shareholders fail to support a 3 for two rights issue announced yesterday that is aimed at raising a much needed $210 million.
The issue will price the shares at 30 cents each, which seems a bargain now after the news and the rebound on markets generally (plus firmer world prices for nickel) saw the company’s shares surge more than 38% to 47 cents.
That was a rise of 13 cents. They ended up 6 cents at 40 cents, a solid gain of 17%.
Who wouldn’t take up the shares at that level? Glencore is effectively in the money, so to speak, for providing certainty for all the money to be raised in the issue.
Glencore already owns 53% of the company and seeming it has full underwritten the issue, the money is in the bag: it’s now only a question of which shareholders want to remain on the register at current levels.
World nickel prices have firmed a bit in the past couple of days of trading after Vale, the big Brazilian based nickel (and mineral) operator revealed production cuts and delays. That halted a slump in world prices, which are set on the London Metal Exchange.
LME nickel prices have jumped more than 18% in the past two days to over $US11,800 a tonne, so its a suddenly become a more favourable market for a metal that has been on the nose for well over 18 months.
Nickel is by far the best performing metal in the past couple of weeks as the great selling wave has taken prices lower on global markets.
It’s a handy development when trying to raise cash at a time when investor nerves are stretched and fear any company asking for cash to help improve costs and replenish liquidity.
So the Minara timing was impeccable from that standpoint, made easier from Glencore’s support.
Earlier this week Minara (MRE) revealed that investigations into a fund raising were continuing, but didn’t specify the route.
The company said in a statement to the ASX that it was cutting costs by cutting workers and changing its mine plan as a slump in nickel prices erodes profits.
"In response to the declining nickel price and other rapidly changing market conditions, Minara has been restructuring its operations over the last six months focusing on reducing costs," CEO Peter Johnston said in a statement to the ASX.
"This has seen the company introduce a range of measures including: cutting discretionary expenditure; reducing the workforce, both Minara’s and the use of contractors; cutting capital project work; reducing overheads; initiating a lower cost mining plan, and reducing the operation’s sulphur usage.
"All these initiatives have contributed to a significant reduction in the cost of nickel production by Minara.
"Most importantly, the recent collapse in the price of sulphur has seen prices on the spot market returning to historical levels of below US$100 per tonne," he said.
Yesterday he and the company had this to say.
"The company will use the funds raised to repay short term funding, to fund committed capital expenditure and to provide the company with working capital to underpin operations for the next 18 to 24 months.
"The decline in the nickel market and the significant increase in the sulphur price have put pressure on Minara’s cash flow, resulting in the need to raise additional capital.
"The funds raised will ensure that we continue to meet our production targets and position us to take advantage of improvements in the nickel market which we anticipate in the second half of 2009," Minara’s Managing Director Peter Johnston said.
"We are also concentrating on reducing costs in all of our activities and that will contribute to our overall business plan and improve production stability," Mr Johnston added."
