Two weeks ago legendary mining billionaire Robert Friedland's Ivanplats lodged a preliminary prospectus to list on the Toronto Stock Exchange in what is set to be one of the largest mining IPOs in Canada in more than a decade.
It's not a moment too soon.
The roughly $300 million share offering – to fund development of Ivanplats's two copper properties in the DRC and the Platreef platinum project in South Africa – must happen soon to provide equity for convertible bondholders.
If the $165 million worth of bonds are not redeemed for stock, rates on the debt soars to credit card-like repayments of just under 19% on November 10 and to an eye-watering 26% in November next year. Bloomberg spoke to an analyst who put it this way:
“It’s a gun to the head,” Geof Marshall, who helps manage $6.3 billion of fixed-income investments at CI Investments Inc. in Toronto, said by telephone on Sept. 21. “The longer they wait, the more the equity holders’ piece of the pie gets smaller and smaller.”
Terms of the IPO which was initially put as high as $500 million may be out as soon as next week and could value Ivanplats, with offices in Vancouver Canada and Johannesburg South Africa, at around $850 million.
Late last year Ivanplats bought 68% of the old Kipushi zinc-copper mine from a company associated with controversial DRC middle-man Dan Gertler.
State-owned Gecamines owns the remainder. According to the prospectus Ivanplats must pay Gertler $85 million before the end of the year even if the share offering does not go through.
5% of the other DRC project, Kamoa, must be handed over to the government of the African nation where many miners, including fellow Canadian firm First Quantum Minerals, have run into trouble.
It may not be plain sailing for Friedland and Ivanplats in South Africa either.
Apart from the recent turmoil in the platinum sector which has since spread to the rest of the industry, Platreef also still has to find a local partner before it will be allowed to mine.
Under the Southern African nation's BEE (Black Economic Empowerment) policy all mines have to be 26% black-owned.
Ivanplats sold a 8% stake in Platreef to a Japanese trading firm for $280 million last year so Friedland's company at least won't be forced to channel much of the IPO funds to the South African platinum venture.
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Robert Friedland speaking at the Mines and Money conference in Hong Kong on the key success factors for a mining project: