- Nickel pig iron producer Nickel Mines (NIC) is raising $231 million to bump up its interest in two Indonesian nickel mines
- Nickel Mines currently owns 60 per cent of both the Hengjaya and the Ranger nickel projects
- The remaining 40 per cent of each project is owned by Shanghai Decent Investment Group
- Nickel Mines will cough up roughly $231 million to increase its ownership of each project to 80 per cent
- The company is tapping investors for the full amount of funding through a one-for-3.6 entitlement offer pricing new shares at 50 cents each
- Nickel Mines shares are in a trading halt today, so have gone unchanged since their last close at 56.5 cents each
Nickel pig iron producer Nickel Mines (NIC) is tapping investors for $231 million to increase its ownership of two Indonesian nickel mines.
Nickel Mines currently owns 60 per cent of both the Hengjaya Nickel Rotary Kiln Electric Furnace (RKEF) Project, or HNI, and the Ranger Nickel RKEF Project, or RNI.
The remaining 40 per cent of both projects is owned by Shanghai Decent Investment Group.
NIC told shareholders today it has made the call to increase its interest in the project after consulting with its investment group partner.
Importantly, Nickel Mines’ move to 80 per cent ownership will bolster its share of nickel produced to roughly 35,000 tonnes per annum. Currently, NIC gets a cut of roughly 26,000 tonnes.
Nickel Mines has a collaboration agreement with Shanghai Decent over both projects. Under the contracts, NIC had until the end of November 2020 to choose whether or not to bump its interest in the projects up to 80 per cent.
US$150 million required
While the company has now made its decision, it will still need to pay US$120 million to increase its interest — US$60 million per project.
At today’s exchange rate, this means Nickel Mines will need to cough up roughly A$92 million per project to increase its holding to 80 per cent.
On top of this, Nickel Mines will also pay Shanghai Decent roughly US$30 million (A$46 million) in compensation for the investment group’s estimated share of undistributed retained earnings from its remaining interest in both projects.
To fund the buy entirely, Nickel Mines is launching a A$231 million entitlement offer.
The offer
Under the entitlement offer, NIC shareholders can subscribe for one new share for every 3.6 shares own at 50 cents a pop. This represents an 11.5 per cent discount to the company’s last closing price of 56.5 cents per share.
Roughly 463 million new shares will be issued under the offer to raise the full $231 million. This will increase the company’s total share issue by 28 per cent.
The entitlement offer is open to both retail and institutional investors.
Nickel Mines shares are in a trading halt today so have gone unchanged since their 56.5-cent close. The company has a $941 million market cap.