Join our daily newsletter At The Bell to receive exclusive market insights
- Cape Lambert Resources (CFE) will be paying 31 per cent interest on a $2 million loan from Plenkung Capital
- The loan will be used to pay off other creditors and financing costs along with working capital
- As a form of collateral for the loan, Cape Lambert will transfer $2.5 million worth of shares it holds in European Lithium to Plenkung
- Plenkung also has the right to appoint a director to the Cape Lambert Board
- In early afternoon trade, Cape Lambert’s shares are sitting still at 0.4 cents each
Cape Lambert Resources (CFE) is borrowing $2 million from Plenkung Capital to pay off other debts.
The iron ore explorer told investors today the cash from Plenkung has some specific destinations: $260,00 will be put into the pockets of creditors, $100,000 to existing financiers, and $75,000 to pay for legal and audit costs and corporate costs.
The remaining money will be used for general working capital.
However, Plenkung is making sure the loan is worth its while, with a 25 per cent interest rate giving the $2 million loan a face value of $2.5 million.
On top of this, Cape Lambert has agreed to pay a fee of six per cent of the total amount received under the loan, either by cash or shares priced at 0.5 cents each. The shares — or the number of shares that would have been paid if Cape Lambert decides to pay the six per cent by cash — also come with an attaching option priced at one cent each and exercisable by the end of 2022.
To sweeten the deal even further, Plenkung has the right to appoint a director to the Cape Lamber Board — although, as of yet, this right has not been exercised.
Finally, Cape Lambert has agreed to transfer $2.5 million worth of fellow ASX-listed European Lithium (EUR) shares to Plenkung as a form of collateral for the loan. Cape Lambert will keep full control of its voting rights with the EUR shares, and the shares will be given back to Cape Lambert once the loan is paid off. If the loan defaults, Plenkung can sell the EUR shares needed to pocket the outstanding amount.
Essentially, this means Cape Lambert will be paying 31 per cent interest on a loan that is almost fully secured through the EUR share transfer. The loan is worth more than half of Cape Lambert’s market cap.
Still, Cape Lambert’s shares have gone unchanged since they came out of a trading halt today. In early afternoon trade, CFE shares are selling for 0.4. cents each in a $4.42 million market cap.
