Message Sam 15 Oct 2011 10:26

ALBIDON TO RESTRUCTURE FOLLOWING STRATEGIC REVIEW

3 October 2011

The Manager Companies
Company Announcements
Australian Securities Exchange Ltd
Level 8 Exchange Plaza
2 The Esplanade
Perth WA 6000

Dear Sir,
ALBIDON TO RESTRUCTURE FOLLOWING STRATEGIC REVIEW
 Intention to reorganise and restructure existing finance facilities to reduce debt and align payments with revised life of mine plan.
 Seeking new strategic and institutional investors to participate in a capital raising.
 Recruit new independent directors.
 Recruit new senior management with international mining experience for Perth head office and Munali operations.
 Restructure and recapitalisation planned to be completed by 31 December 2011.
The Board of Albidon Limited (“Albidon”) (ASX: ALB) today announced it has approved the implementation of a series of steps intended to:
 Address operational issues impacting the efficiency of the Company’s Munali nickel mine in Zambia
 Restructure Albidon’s debt and capital structure so that the Company is more attractive to investors
 Ensure that Albidon has permanent quality management for the next stage of the Company’s development
 Provide Albidon with a diverse Board of Directors with the appropriate skills to guide the Company through its future growth
The proposals follow a comprehensive review of Albidon’s operations, its board composition and management, and its debt and capital structures, conducted by Riverstone Advisory Pty Ltd (“Riverstone”).
“We believe we have an excellent asset at Munali and the basis for a sound mining business,” said Acting Managing Director Harold Ou Wang. “The Board has unanimously accepted all of the recommendations from Riverstone as necessary actions for Albidon to increase efficiency and profitability”.
“The Riverstone review confirms the Board’s belief that the underlying resource at Munali appears capable of supporting a profitable operation, and has the potential for an extended life. However, it also confirms that in order for this potential to be fulfilled it is imperative that the Company is successful in completing the restructuring initiatives we have announced today,” Mr Wang said.
Subject to negotiation and regulatory approvals, the Board’s desire is to complete the restructuring of the Company prior to 31 December 2011.
Raise new equity capital to strengthen the balance sheet and introduce new strategic investors
The Board has engaged Patersons Securities (“Patersons”) and Riverstone Capital for the purpose of determining the optimum strategy for raising new equity capital. In particular, Patersons and Riverstone have been instructed to seek new strategic and institutional investors prepared to subscribe for a minimum of $20 million and a maximum of $30 million of new equity. This is considered necessary to provide funding to address operational issues at the mine identified as part of the Riverstone review (as announced on 9 September 2011), strengthen the Company’s balance sheet and provide financial flexibility.
Jinchuan Group Ltd (“Jinchuan”), which currently owns 49.93% of Albidon’s current issued share capital, has advised the Board that it is supportive of the Company raising new capital from external parties. It is expected that Jinchuan’s interest in Albidon will be diluted as a result of any capital raising. Jinchuan has further advised the Board that it will agree to reduce the number of its nominee Directors to reflect the revised shareholding structure.
Further details of the proposed capital raising will be announced in due course.
Reorganise and restructure finance facilities
The quantum and servicing requirement of Albidon’s debt is disproportionate to projected cash flow and mine life. As at 30 June 2011, Albidon had a total debt obligation of $125 million, including convertible notes with a book value of $19.6 million and accrued interest of $10.4 million.
Jinchuan controlled entities have provided all of the Company’s debt facilities (having acquired all third party debt during the Company’s time in Administration). Jinchuan has provided Albidon with written assurances that it will not take any action available to it as a result of Albidon being in default of its loan obligations, and will continue to provide Albidon with the necessary financial support.
Following a request from the Board, Jinchuan has provided the Company with a written assurance of its support for the reorganisation proposals detailed in this announcement. Albidon and Jinchuan will work together to agree the terms of a restructure of Albidon’s debt to reduce the outstanding principal to approximately $50 million and to align the repayment terms with the new life of mine plan. The final agreed terms of any restructure, including any regulatory approvals required, will be announced to the ASX in due course.
Jinchuan has also indicated it is prepared to facilitate the entry of new strategic investors by divesting convertible notes currently held by it. It is the Board’s intention that such a transaction would only be undertaken on the condition that the notes are immediately converted into new equity by the new note holder. Transfer of the convertible notes in such a circumstance will supersede the agreement announced on 31 May 2011 to restructure the convertible note facilities by converting half to a secured loan.
Recruit experienced new management and independent directors
In order to lead the Company through the next stage of the Company’s development, the Board has commenced a recruitment process for permanent new senior management with requisite international mining experience for its operations in Munali and in Perth.
The Board is also seeking to appoint additional non-executive Directors with Australian listed company and/or international mining company credentials.
Upon the appointment of a new Managing Director and/or Chief Executive Officer, it is the Board’s intention that Harold Ou Wang will resume his position as an independent non-executive Director.
Appointment of Chief Financial Officer and Company Secretary
Mr Noel McAuliffe, who has been Acting CFO and Company Secretary since 4th July 2011, has been appointed permanent CFO and Company Secretary.
“Noel has already made an important and significant contribution to Albidon and I am delighted he has agreed to join the Company on a full time basis,” said Mr Wang. “He has extensive experience with public companies, has worked in the nickel industry and has Zambia and Africa work experience.”
Suspension of trading in Shares
In order to ensure that the Company’s securities are traded in a fully informed market in which the Company’s financial future is more secure, the Company is therefore requesting that its securities remain in voluntary suspension pending finalisation of the terms of the transactions contemplated by this announcement. In the Company’s view, it would be materially prejudicial to the successful completion of the interdependent and complex transactions outlined above for trading in Albidon’s securities to be reinstated at this time.
These transactions are considered by the Board to be necessary to raise sufficient capital to implement initiatives designed to address operational issues identified in the Company’s announcement made on 9 September and to ensure debt is restructured so that servicing and repayment obligations are more appropriate for the expected life and cash flows of the Munali mine.
It is anticipated that the required financial objectives and contractual completion can be achieved by 31 December 2011.
The transactions outlined above impact directly on the finalisation of the Company’s Interim Financial Report for the six months ended 30 June 2011 (such as the impact on the carrying value of non-current assets if operational issues cannot be adequately rectified) with release being delayed pending the Company having sufficient certainty as to the successful implementation of the restructure.
The Company is not aware of any reason why its request for the continuation of the voluntary suspension should not be granted.
For and on behalf of Albidon Limited.
Noel McAuliffe
Company Secretary
Further information:
Alan Jury
FTI Consulting
+61 418 833 149
alan.jury@fticonsulting.com
Les LT vaincront !