The company will raise $60 million via an underwritten placement to sophisticated, professional and institutional investors at an underwritten floor price of $1.95, a 9.7% discount to Western Areas’ closing price yesterday.
The final price will be determined by a bookbuild today.
Macquarie Capital and Morgan Stanley are acting as joint lead managers, underwriters and bookrunners.
Western Areas will raise up to an additional $10 million via a share purchase plan at the same price as the placement.
The bulk of the funds (around $26 million) will be used to replenish working capital for the costs of the 2015 Cosmos acquisition from Glencore.
The early repayment of the second and third instalments of the purchase price reduces the cost by $400,000 to $12.6 million.
Another $25 million will be used to repay $25 million under an ANZ facility, while another $5 million will be used to complete a bankable feasibility study on the Odysseus deposit at Cosmos.
Despite the Forrestania operation remaining cashflow positive with unit costs of just $US1.63 per pound, the company said the raising was a sensible measure to strengthen the company’s position.
Western Areas expects to have a net cash position of $A15 million going into the June quarter, and will be debt-free with around $61 million cash following the raising.
Western Areas managing director Dan Lougher said the raising would provide the company with greater balance sheet flexibility during the current nickel price environment and allow it to be opportunistic when growth prospects arose.
“History has shown that when nickel prices rebound, they can do so very quickly, and we want to make sure we are in a position to respond accordingly,” he said.
“It is important to note that Western Areas does not require forecast consensus nickel prices to deliver strong cashflow outcomes.
“As a rule of thumb, every $1/lb improvement in the nickel price equates to additional EBITDA and free cashflow before tax of approximately $35 million per annum.”
Last year, Western Areas deferred the Forrestania mill recovery enhancement project and reduced exploration spend due to market conditions.
“With the increased balance sheet strength as a result of the equity raising, we will maintain our ability to rapidly recommence these discretionary activities should market conditions be supportive whilst also continuing to advance the Company’s medium-term project growth opportunities."
Western Areas shares will remain in a trading halt while the bookbuild is completed today.
