A good article in the SMH this morning - balanced and very pointed >> PNA learned from the OZ debacle >> to sho up the better management. The Fat Prophet statement that PNA was on the edge of admininstration is a bit misleading but over all it shows that PNA has the goods to survive. I see this as one of the last steps to prove PNA to the market.
"Sydney Morning Herald PanAust pays high price to secure debt extension Jamie Freed January 6, 2009
IN AN extraordinarily tight credit market, it appears that almost any debt refinancing is good refinancing - no matter how onerous the terms.
At least that was the market reaction when PanAust - a Laotian copper miner - yesterday received an extension of up to one year on an $US80 million ($112 million) debt facility from its lender, Goldman Sachs JBWere.
PanAust shares more than doubled to close 9c higher at 17.5c, even though the lender extracted a steep price for the extension.
The interest rate on the debt, originally due for repayment on March 31, rose from 12 per cent to 15 per cent. PanAust also agreed to issue Goldman with 75 million options exercisable at 10.5c, which equates to 4.8 per cent of the company. The lender will receive another 75 million options if the loan is not repaid by July 31.
In tandem, PanAust entered a $US8.1 million revolving working capital facility with three banks that will involve the issue of another 54 million options.
PanAust's managing director, Gary Stafford, said the miner was happy to achieve any sort of refinancing at present.
He said his company had been recently "tarred with the same brush" as OZ Minerals, a rival that has been unable to refinance $1 billion of debt, even though its situation was less precarious.
Goldman had more incentive to roll over PanAust's debt than do the lenders of OZ. Its PanAust debt is subordinated to a separate $US217 million syndicated facility that would rank first if the company collapsed.
Mr Stafford said PanAust expected to close out the Goldman facility, and obtain more financing for an expansion, by July 31. More than half a dozen parties, including metals traders and resources funds, have expressed interest in providing the company with a replacement debt and/or convertible note facility.
PanAust's Phu Kham operation in Laos is expected to produce 65,000 tonnes of copper and up to 80,000 ounces of gold at a cash cost of less than US90c a pound for copper this year.
A Fat Prophets analyst, Gavin Wendt, said OZ should have undertaken a similar deal last year despite the high price.
"What is worse, to be on the verge of administration or to take the financing opportunities available? I'm sure if [OZ] had their time again, they would have done things differently. I would certainly hope so."
OZ, which has been burning through cash at a rapid rate, expects its lenders will provide formal details about a new bridging finance facility by Friday.
A spokesman for Australia's third largest diversified miner, Matthew Foran, said its key project, the Prominent Hill mine in South Australia, was not expected to be cash positive until the second quarter.
Some of its other operations are also losing cash. Mr Foran would not reveal the size of the bridging facility being sought."
PNA Price at posting:
16.6¢ Sentiment: LT Buy Disclosure: Not Held
