There has been a spate of recapitalisations among mining companies in recent months with a growing number of junior explorers in financial distress despite record high prices in some commodities.
Rising costs, challenging market conditions, and investor activism placing pressure on company boards to improve operational and financial inefficiencies are creating a perfect storm in which a growing number of mining companies are restructuring to stabilise their businesses in a trend not seen in years.
Firms like FTI Consulting and KordaMentha in particular are increasingly being appointed by juniors in financial distress to recover value on behalf of stakeholders.
Distressed situations involve company directors, lenders, shareholders, employees, and other creditors working together to protect and recover value and ultimately provide direction in times of crisis.
Whether it be implementing an in-depth turnaround plan to drive value, executing a sale, or delisting of a company, Mining.com.au takes a look at some recent examples of recapitalisations and restructurings in the sector.
Lepidico
On 3 December, Richard Tucker and Paul Pracilio of KordaMentha’s restructuring division were appointed as joint and several voluntary administrators of vertically integrated lithium developer Lepidico (ASX:LPD).
The decision to appoint administrators followed unsuccessful attempts to secure financing for the Karibib Lithium Project and mineral concentrator.
The company has an 80% shareholding in the fully permitted Karibib Project, one of the most advanced hard rock lithium development projects globally. The project is located in Namibia with global mineral resources totalling 11.87 million tonnes grading 0.45% lithium oxide.
Lepidico has set out to capture a first-mover advantage in the current cycle with lithium in long-term structure undersupply. Despite establishing a binding offtake agreement and implementing risk management strategies, the company has still been unable to lock in project financing.
Group 6 Metals
Group 6 Metals (ASX:G6M) on 4 December was another junior explorer to collapse under the weight of its debt and ailing finances. The company is seeking to recapitalise in a bid to reduce debt, strengthen its balance sheet, and provide liquidity for it to review, plan, and execute its operational improvement plan.
The recapitalisation plan involves the conversion of Group 6’s debt and other creditor liabilities into shares.
As part of the plan, the company is restructuring its board and executive management team, with Chairman Johann Jacobs retiring and CEO Keith McKnight departing. Further changes include the resignation of non-executive directors Greg Hancock and Tony Caruso, while Michael Zannes will step down as CFO, with a replacement to be appointed to take over the role.
Moelis Australia in September was appointed to conduct a strategic review to determine the optimal capital structure and consider M&A opportunities to reposition Group 6 Metals and grow its valuation.
During the past quarter, the company pursued several initiatives to address the necessary funding requirements and restructure its balance sheet, including an equity raise, an agreed indicative terms for a limited credit facility, and engaging with strategic investors.
While receiving some interest in its Dolphin Tungsten Mine, feedback reinforced the need for a significant capital restructure.
Aureka
Just last month, Navarre Minerals, now called Aureka (ASX:NML), resumed trading on the ASX after completing a recapitalisation, raising $6 million.
Navarre listed on the ASX in 2010 as a Victoria-focused gold exploration company but found itself with excess financial commitments in 2022-2023, which forced it to enter administration, and have its shares suspended from the ASX in June 2023.
Since recapitalising, it has re-emerged debt-free with a reorganised capital structure and no outstanding convertible debt, which positions it to advance its gold exploration projects across Victoria.
Aureka focuses on discovering large, long-life gold projects in Victoria. Its flagship asset is the Stawell Corridor Gold Project, in an area that hosts the Stawell (6-million-ounce) and Ararat (1-million-ounce) goldfields. Within this project, the company reported its maiden inferred mineral resource (304,000oz) and additional exploration target (280,000-420,000oz) on the margins of the Irvine basalt dome.
Speaking to Mining.com.au recently, Managing Director James Gurry says recapitalising as a pure-play explorer focused on its historical assets, which are close to infrastructure and operating gold mines, the market now recognises its a reinvigorated company with a reset in valuation.
True North Copper
Meanwhile, this news service reported on 25 November that True North Copper (ASX:TNC) is conducting a $50.3 million conditional placement, as part of a broader recapitalisation, which will support funding a new exploration strategy.
Nebari Natural Resources Credit Fund II has agreed to convert part of its outstanding $3.9 million debt owed into shares in True North via a debt-to-equity conversion.
Once completed, True North will be debt-free with a strengthened balance sheet. The company will be able to fund a revised business strategy which is focused on definition drilling at the Cloncurry Copper Project in Queensland, expanding the mine life and optimising the previous mine plan, as well as an extensive exploration program at the Mt Oxide Project.
Managing Director Bevan Jones says recapitalising True North is a great outcome and a testament to the strength of the portfolio of copper assets.
“With a strong cash position, zero debt and a new experienced board and leadership team, we now have the opportunity to refocus our strategy and explore growth opportunities,” Jones says.
Panoramic Resources
Zeta Resources was removed from the official list of the ASX on 17 October following completion of the compulsory acquisition by UIL — the major shareholder of the company.
Interestingly, just a month earlier Zeta Resources put forward a deed of company arrangement (DOCA) in order to assume all of the shares in beleaguered Panoramic Resources.
Panoramic was put in the hands of administrators FTI Consulting in December last year as nickel prices deteriorated. The company owned the Savannah Nickel-Copper-Cobalt Project in northern Western Australia.
FTI said at the time that “given the company’s status, the costs and administrative burden of remaining listed on the ASX outweighed the benefits of remaining listed”, and opted not to pay the company’s annual listing fees, resulting in automatic de-listing.
Calidus Resources
Shares in Calidus Resources (ASX:CAI) were suspended from the ASX in July when Macquarie Bank — Calidus’ largest shareholder — shut down operations. KordaMentha was appointed as receiver with FTI Consulting voluntary administrators.
On 10 October, the deed administrators confirmed that the DOCA from the West Coast group of companies had been executed. West Coast was registered at the end of August with mining billionaire Mark Creasy its sole director.
Three of the DOCAs have now also effectuated. The deed administrators and West Coast are now working to complete the conditions precedent to the remaining DOCAs.
The embattled gold miner in September appointed administrators despite having assets worth some $1.3 billion at the end of June 2023. In July this year, Creasy cut a deal to purchase $149 million worth of debt owed by Calidus to Macquarie Bank through a loan and hedging facility.
Calidus reported total production at Warrawoona of 15,118 ounces of gold in the three months to the end of March this year, up from 11,980oz at the end of last December.
Write to Adam Orlando at Mining.com.au
Images: Aureka, Group 6 Metals & Panoramic
