Guest Contributor | Sep 22, 2020 | 0
Sandpiper partner opts out
Minemakers has announced the sale of its 42.5% interest in the controversial Sandpiper Project located offshore Namibia to Mawarid Mining in a deal worth A$25 million.
The deal, subject to shareholder and Namibian Competition Commission approval, also includes the sale of Minemakers’ 70% interest in the Rocky Point Project.
In a statement released on Thursday, Minemakers said the ownership structure for the Sandpiper Project was not conducive to the efficient development and financing of the project despite the project representing an attractive medium-term development opportunity for the company.
Minemakers said by selling its 42.5% interest in the project “at this time of very weak market conditions and limited availability of capital,” it had avoided the dilutionary equity of capital raising which would likely be necessary to fund the development of the Sandpiper Project.
But despite the sale, Minemakers will still retain an indirect interest in the Sandpiper Project through its 14.2% shareholding in UCL Resources Limited (UCL) “providing Minemakers shareholders with exposure to the value upside from the project.” UCL Resources is an equal shareholder to Minemakers in the Sandpiper Project, also with 42.5% shareholding.
Following the sale, expected to be completed before the end of the year, Minemakers say it will focus on its 100%-owned Wonarah Project which it aims to develop into a vertically integrated fertiliser production operation.
The surprise announcement by Minemakers comes at a time when the company is the subject of an off-market reciprocal take-over bid by UCL. The UCL offer, which closes on 15 October, came after Minemakers made an initial unsuccessful take-over offer to acquire UCL, offering 13 Minemakers shares for every 10 UCL shares held. The Minemakers offer closed without any takers despite UCL’s own independent expert having said that the Minemakers offer is fair and reasonable to UCL shareholders.
UCL had hoped to fund the Minemakers offer through a A$9 million convertible note agreement with Mawarid Mining and from cash reserves. But the complexity of cross shareholding allowed Minemakers, as a significant minority shareholder in UCL, to oppose the issuing of the proposed bond. This was stated as reason for the rejection of the bid.
Minemakers argued that the planned convertible note to be used to fund the cash component of the UCL offer is not an attractive instrument. “It will introduce unrequired debt with an interest rate of 7.5% and an 18 month term.”
The company added at the time of the announcement of the UCL bid that the instrument will also result in further dilution of UCL shareholders when the debt is either repaid or converted.
Minemakers argued that the offer is not conditional on achieving a 100% outcome which leaves open the possibility for further cross-shareholding complications. Minemakers already holds a 14.2 % stake in UCL Resources
The Sandpiper Project is based on a marine phosphate deposit situated about 60km offshore and 150km south of Walvis Bay in water depths of 180 to 300m. Minemakers, together with partner Union Resources Limited owned 42.5% shareholding each while local empowerment partner, Tungeni Investments owns 15%.
Once operational, the project could potentially produce 3 million tonnes of marketable rock phosphate concentrate per annum.