LAFAYETTE MINING LIMITEDABN 88 076 390 451Level 13190 Queen...

LAFAYETTE MINING LIMITED
ABN 88 076 390 451
Level 13
190 Queen Street
Melbourne
Australia VIC 3000
Telephone: +61 (0)3 8622 1456
Facsimile: +61 (0)3 9606 0133
E-mail: [email protected]
Website: www.lafayettemining.com
For Release: 3 October 2007
LAFAYETTE RESTRUCTURE OF DEBT AND
HEDGING OBLIGATIONS
Lafayette Mining Limited (Lafayette or the Company) is pleased to announce that it has
executed a conditional term sheet with South East Asian Strategic Assets Fund LP
(SEASAF), acting on its own behalf and that of a new co-investor secured by SEASAF, to
restructure the Company’s balance sheet and capital structure.
When completed, the restructure will eliminate all interest bearing bank debt and outstanding
hedging commitments in relation to the project, as well as provide a US$25 million working
capital facility for the Rapu Rapu project and the Company. Post restructure, Lafayette will be
well positioned to focus on successfully completing the commissioning of the Rapu Rapu
base metals plant and will have access to substantial cash flow in order to pursue other
value creating opportunities.
Pursuant to the conditional terms sheet (which is not binding except in respect of
confidentiality and exclusivity):
􀂃 A special purpose vehicle (SPV), owned by SEASAF and a co-investor, will invest a
total of US$151.75 million in the project and the Company as follows:
o A sum of US$123.00 million will be paid to the project bank group in full
settlement of all outstanding secured loan bank debt and base and precious
metals hedging obligations of the Lafayette Group as at the Completion Date (31
December 2007), including interest and fees accrued to that date. Prior to the sale
of the debt to the SPV, the bank group will cash settle all hedging obligations.
o A loan of up to US$28.75 million will be made to the Company, and in turn to the
project, for use as follows:
􀂃 Settlement of a US$3.75 million debt with Leighton Finance Limited;
􀂃 Working capital and emergency reserves for the project of up to US$20
million;
􀂃 Funding for Company and transaction expenses of up to $2.0 million;
􀂃 Funding for contingencies of up to US$3.0 million.
Lafayette Mining Limited
ASX 2007-43 – Lafayette Restructure-031007 Page: 2
The loan will attract interest at a rate of LIBOR plus 4% and will be repayable in a
single ‘bullet’ payment on a date that is two years after the Completion Date if it is
not converted to equity in the Company prior to that date.
􀂃 The SPV and the Company will enter a put and call option agreement in respect of the
total investment amount of US$151.75 million under which, for a period of two years,
the SPV shall have the right to convert (ie. ‘put’) the investment amount to ordinary
shares in Lafayette at a conversion price of AU2 cents per share. On the Completion
Date, the first US$21.12 million of the investment amount will be converted to Lafayette
shares, and subject to the comments below, the balance may be converted at the
election of the SPV within the term of the option.
􀂃 If the project’s Ore Reserves are increased by 800,000 tonnes, relative to the project’s
stated Ore Reserves as at 30 June 2007 after taking into account depletion of
Reserves by mining since that date, within a two year period from the Completion Date,
the Company may call on the SPV to convert any outstanding investment amount into
Lafayette shares at a price of AU2 cents per share.
􀂃 Conversion of the total investment amount into Lafayette ordinary shares will have the
effect of eliminating all debt, leaving the project both unhedged and ungeared assuming
that Lafayette’s co-investor in the project, Philco Resources Inc. (Philco) agrees to the
terms of the restructure proposal.
􀂃 If an underwriting can be confirmed by 31 October 2007, the Company will invite all
existing shareholders to participate in a 1 for 1 renounceable rights issue on the
Completion Date. Shares will be priced at AU2 cents per share, the same price at
which the SPV will be permitted to subscribe for Lafayette shares. If underwriting
cannot be confirmed, then a placement of an equivalent number of shares in Lafayette
will be offered to investors introduced by the SPV. Any amount raised by the
underwritten rights issue or the placement will reduce the amount to be invested by the
SPV. If an underwritten rights issue does not occur before Completion, Lafayette
shareholders may, following Completion and at the option of the SPV, be offered an
opportunity to participate in a non-underwritten rights issue at a price of AU2 cents per
share.
􀂃 To ensure the successful completion of this transaction the US$15 million SEASAF
convertible note holders and the A$8 million convertible note holders at the Lafayette
level will need to support the restructure proposal as described below.
o In lieu of arranging fees for this capital raising, SEASAF and other co-investors
have agreed to convert convertible notes with a face value of US$15 million into
ordinary shares in Lafayette at an issue price of AU2 cents per share. SEASAF
and the co-investors have also agreed to waive any premiums they may have
been entitled to receive under the note issuance terms due to the Black-Scholes
option premium embedded in the notes and to waive any participation rights in the
renounceable rights issue should it proceed.
o It is a condition of the proposal that the A$8 million convertible note holders agree
to redemption of the notes by the Company at AU20 cents per share. The shares
issued by way of redemption will also be eligible to participate in the renounceable
rights issue should it proceed. In addition, it is a condition of the proposal that the
note holders waive their entitlement to the interest payment due on the 15
October 2007.
Lafayette Mining Limited
ASX 2007-43 – Lafayette Restructure-031007 Page: 3
o The development of the restructuring proposal has been very difficult and
complex. Each of the above elements is inter-dependant and the support of all
stakeholders will be essential to complete the transaction.
􀂃 All of these initiatives are also subject to the satisfactory completion of a due diligence
review of the Lafayette Group on or before 30 November 2007, at which time the SPV
must irrevocably commit to complete the transaction by 31 December 2007 (the
Completion Date), subject also to the satisfaction of various conditions that are typical
for a transaction of this nature, including Lafayette shareholders’ approval.
􀂃 The SPV will shortly lend the Lafayette Group US$10 million to fund working capital.
This loan will be made under the terms of the existing Multi Option Facility which will
have its limit increased from US$9.546 million to US$19.546 million to facilitate the
loan.
􀂃 Debts to non-bank lenders, including Leighton Finance Limited, will be settled by the
Company who will also endeavour to reach agreement with Philco on settlement of
both secured and subordinated debt lent to the project by Philco and on the resulting
changes to the ownership structure of the Rapu Rapu project moving forward. Philco’s
ultimate ownership in the project will be a function of whether or not it participates in
this new capital injection. It should be noted that no agreement has been secured with
Philco at this stage of the negotiations.
Managing Director, David Baker, said “The implementation of these arrangements potentially
place Lafayette on a very solid base for the first time in many years. Whilst the size of the
capital raising involved will result in dilution of existing shareholders, they will have an
interest in a completely ungeared, unhedged project, with a sufficient working capital buffer
to cover unexpected events such as experienced late last year with Super-typhoon Reming.
“The removal of the debt and hedging obligations will enable Lafayette to focus on improving
operations and increasing project mine life. Early access to substantial cash flow from the
project is a key advantage for Lafayette to pursue other value creating opportunities in the
current competitive resources market.”
Resulting Ownership of Lafayette and the Project
The possible resulting Lafayette ownership levels following alternative triggers are presented
below:
Stage 1: Conversion of SEASAF and A$ convertible notes, part exercise of Put and Call
Option by SPV and completion of rights issue:
Shareholders Shares
(Million)
% in LAF
Existing shareholders 981.5 23.5%
Placement / Rights Issue Shareholders 1,021.5 24.5%
AUD Convertible Note Holders 40.0 1.0%
SPV and SEASAF 2,129.4 51.0%
4,172.4 100.0%
Lafayette Mining Limited
ASX 2007-43 – Lafayette Restructure-031007 Page: 4
Stage 2: Exercise balance of Put and Call Option at AU2 cents per share
Shareholders Shares
(Million)
% in LAF
Existing shareholders 981.5 9.0%
Placement / Rights Issue Shareholders 1,021.5 9.4%
AUD Convertible Note Holders 40.0 0.4%
SPV and SEASAF 8,948.8 81.4%
10,991.8 100.0%
Notes to tables:
1. The numbers are indicative and may move due to various adjustments, including
changes in the rights issue take up or changes in interest rate and period for the New
SPV Loan.
2. Exchange rate assumed – US$0.85 : A$1.00
3. The numbers assume 100% take up of the proposed placement/rights issue.
4. The redemption of the LAF A$8.0 million convertible notes has been incorporated
(assuming redemption at AU20 cents per share) and it is assumed that those note
holders participate fully in the renounceable rights issue.
Ownership of the SPV
The SPV is owned by SEASAF and a company associated with a private investor. SEASAF
and two co-investors are the holders of US$15 million of convertible notes in Lafayette.
SEASAF is a sector focused fund, specialising in energy, resource and infrastructure
investments in South East Asia.
Conditions
The term sheet that has been signed is subject to the completion of a range of conditions
precedent that are typical for transactions of the nature contemplated, including completion
of satisfactory due diligence by the SPV. The term sheet is not legally binding on the parties
(except in respect of confidentiality and exclusivity). The Company anticipates that legally
binding formal documentation will be entered into by the Completion Date if agreement can
be reached with the various stakeholders.
All elements of the restructure proposal are inter-dependent. Relevant security holders of
Lafayette will be invited to meet and asked to approve certain key elements of the restructure
proposal.
The arrangement reflected in the term sheet is subject to an exclusivity period until 30
November 2007.
Lafayette Mining Limited
ASX 2007-43 – Lafayette Restructure-031007 Page: 5
Transaction Process
The SPV has until 30 November 2007 to complete its due diligence on Lafayette and the
Rapu Rapu project, at which time it must irrevocably commit to complete the transaction by
31 December 2007.
It is expected that shareholder meetings will be held in mid-December 2007 to approve the
transaction. Documentation, including information on the proposed transaction and an
independent expert’s opinion, will be sent to shareholders one month prior to the meeting.
Lafayette’s financial advisor on the restructure is Gryphon Partners, whilst Watsons Lawyers
have provided the Company with legal advice.
For further information, visit: www.lafayettemining.com
CONTACT:
David Baker – Managing Director
Jeff Quartermaine – Chief Financial Officer
Kay Donehue – Executive Assistant / Investor Relations
Lafayette Mining Limited: +61 (0)3 8622 1456
ASX Code: LAF