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CAML expands base metal production through bold acquisition

Central Asia Metals (CAML) is extending the range and size of its base metal production through the proposed US$402.5m acquisition of Lynx Resources, owner of the Sasa zinc/lead mine, in Macedonia. CAML is funding the acquisition through a combination of debt (US$187m) and equity (US$195.5m).

Sasa is owned by Lynx Resources, a company set up explicitly to acquire the mine in 2015, and is co-owned by Orion Mine Finance and Fusion Capital. The underground mine, produced 23 kt of zinc in concentrate and 29kt of lead in concentrate in 2016. The low-cost mine has 20 years of reserves.

Sasa reported revenue of US$79m in 2016 with EBITDA of US$30m.

In terms of the deal, CAML must pay US$340.5m in cash on completion. To fund this, the company has secured a US$120m senior debt facility with metals trader Traxys (who already buys virtually all of CAML’s copper from Kounrad) at an interest rate of LIBOR plus 4.75% and with a 5- year term. Additional debt is in the form of a roll over of an existing US$67m facility from Societe Generale/Investec existing facility, which CAML will assume from Lynx. The debt attracts interest at LIBOR plus 5% and it extends for 5 years.

To finance the remainder of the cash portion of the acquisition cost, CAML has placed 49.1m new shares and sold 10.6m existing shares held by a director of the company, through J.P. Morgan Cazenove and Peel Hunt, acting as Joint Bookrunners. The total placing, completed on 22 September at a price of 230p/share, raised £137.4m (approximately US$186.6m).

Finally, CAML will distribute US$50m worth of company shares (the Consideration Shares) to Orion and will also pay the sellers US$12m of deferred consideration, payable in six equal monthly instalments commencing on the first anniversary of completion.

CAML shareholders will vote on the issue of new shares at an EGM on 11 October and, if approved, the new shares will trade on the LSE from 12 October. The total number of issued shares in the company will rise from 111.6m to 161.2m.

Meanwhile, CAML has reported strong operational and financial results in H1 2017. The company’s Kounrad operation sold 6.9kt of copper, 8% up on H1 2016, and with a 15% increase in the price of copper received, revenue rose 25%, to US$38.6m. Fully inclusive cost of production was up 11%, to US$1.08/lb, with C1 cash costs up 13%, to US$0.45/lb as production commenced in the Western dumps.

EBITDA rose 38% and EPS was up 41%, to US13.5c.

The company has announced an 18% increase in the interim dividend, to 6.5p/share.

CAML expands base metal production through bold acquisition: CAML

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