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from http://au.news.yahoo.com/thewest/business/a/-/wa/13093934/western-areas-rules-out-equity-raising/

Western Areas rules out equity raising

Nick Evans, The West Australian March 6, 2012, 6:11 am

Western Areas managing director Dan Lougher says there is no chance WA's biggest nickel miner will return to the equity markets to fund the $68 million purchase of the Lounge Lizard asset from Kagara.

Shares in Western Areas, which yesterday confirmed it had agreed to terms on Lounge Lizard with Kagara, crashed 4.2 per cent to $5.44 yesterday on rumours the miner would need to tap shareholders to fund the acquisition.

But Mr Lougher said there was "no chance" of an equity raising, and the company had more than enough in cash and available debt to fund the buy on its own books.

The $68 million valuation of Lounge Lizard, which is next to Western Areas' Flying Fox mine 400km south-east of Perth, won the support of most analysts who said the sales price was towards the lower end of their expectations.

Western Areas had $160 million at cash at the end of last year, along with an undrawn $125 million banking facility.

In addition to the Lounge Lizard acquisition, Western Areas needs to fund $105 million to pay back a set of convertible bonds maturing in July, and the miner is also expected to approve a $10 million expansion of its processing facility at its Forrestania complex this year.

Mr Lougher said Western Areas had not yet made a decision on what mix of cash and debt it would use to fund the Lounge Lizard deal but said it "has it in hand".

"Our production profile over the next 12 months is looking very strong, we'll be making a lot of cash as well so we're a bit surprised at the market reaction to what we see as a great deal for Western Areas," Mr Lougher said.

Kagara managing director Geoff Day said he was content with the negotiated price, given nickel prices had fallen substantially since Lounge Lizard was put on the market late last year.

The sale was announced as part of Mr Day's plans to refocus Kagara on its North Queensland copper and zinc operations, although the broader plan will require substantial rethinking due to the recent fall in commodity prices.
Kagara suspended operations at its Mungana zinc mine in January and is expected to review other low-margin operations. Its shares remain in suspension while the company finalises its half-year report, which still needs to be signed off by its auditors.