Lonmin has agreed to enter into a US$200 million metal purchase agreement with Pangaea Investments Management pursuant to which the upfront payment will be amortized over three years.
The transaction is expected to close within the week.
“We are pleased to announce an improved funding arrangement as it immediately enhances our liquidity. Regrettably, the new facilities do not address the fundamental business challenges facing the company and do not offer an opportunity to avoid the announced retrenchments and shaft closures,” says company CEO, Ben Magara.
“Accordingly, the Board remains focused on completing the Sibanye-Stillwater all share transaction, which we firmly believe provides a sustainable solution and is in the best interest of all our stakeholders. I would like to thank the lending groups that have supported the company over the years.”
“We recognise our requirement to complete this financing transaction and we remain focused on completing the acquisition of the company and delivering on our strategy of creating value for all stakeholders,” says Sibanye Stillwater’s CEO, Neal Froneman.
Lonmin will settle its pre-existing term loan of US$150 million and cancel all its other pre-existing undrawn facilities with both its South African Rand and US Dollar lender groups.
The Facility will provide Lonmin with improved liquidity and removes certain restrictive current lender conditions notably the tangible net worth covenants contained in the Existing Debt Facilities which were waived by the Existing Lenders subject to the anticipated successful completion of Sibanye-Stillwater’s all share offer for Lonmin.
As with the Existing Debt Facilities, the Facility is also secured over Lonmin’s assets.
The Facility requires settlement through monthly delivery of Platinum and Palladium (2E) ounces in the ratio 69:31, providing PIM with a minimum annual return on investment of 15% on the upfront payment which will be reduced by the deliveries over the term of the agreement.
The Facility allows for early settlement in full after one year, at Lonmin’s discretion and subject to JCC achieving a return on investment of 16%.
The Facility could enhance Lonmin’s cash position as it requires only partial settlement of between US$60 million and US$80 million upon completion compared to the Term Loan (US$150 million) which requires full settlement.
Following Completion, and subject to Sibanye-Stillwater becoming a co-obligor, PIM will release all security over Lonmin’s assets and delivery is amended to a fixed number of 2E ounces per month, to provide PIM with a minimum return on investment of approximately 12% over the remaining period of the New Facility.