capital raising , page-2

Article from The Australian 8th Dec 2008
http://www.theaustralian.news.com.au/business/story/0,,24764534-18261,00.html


COPPER lost 15 per cent of its value in one week, closing on Friday at $US3050/tonne. That's the sort of news that takes the edge off your day should one happen to be a copper producer, especially if you had just got into business as Equinox Minerals (EQN) did last week with production of its first copper concentrate at Lumwana in Zambia.

And it coincided with news from PanAust (PNA) that it had signed a deal to sell concentrates from its Laotian mine containing 27,000 tonnes of copper and 30,000 ounces of gold at spot prices to an unnamed metals trader.

Warwick Grigor has put us on alert about PanAust. He is worried that the falling copper price means problems for the company renegotiating an $US80 million loan in the first half of 2009, about a third of its outstanding debt. His latest client note out of BGF Equities says that the need for OZ Minerals (OZL) to go into a month-long suspension shows how hard the banks are playing the game at the moment when companies need to re-finance.

His figures show that PanAust will have sufficient cash flow next year -- at present copper prices -- to service its debt, but the decline in those prices may make the company's bankers even more intransigent and lead to demands for more onerous covenants before they will sign off on the $US80 million.

Grigor says that investors need to be on the watch for other companies that have debt negotiations coming up in view of, as he puts, the banks behaving badly. "Ordinarily the free market forces can handle pressure situations like these but the downside is much greater when we are in the depths of a bear market and the banks are running scared," his note added