PERTH (miningweekly.com) – Explorer AusAmerican Mining this week announced plans to raise up to A$60-million through a bond offering in order to fund its acquisition of a majority share in Chinese company Shenglong International Investments.

The first A$30-million would be raised through the first tranche of the note issues, which would have a seven-year term at a fixed interest rate of 11.5% a year.

AusAmerican could issue additional notes of a further A$30-million in a second offer.

The company told shareholders that AusCap will underwrite the initial offer to a maximum of A$12-million, which would allow the company to meet an initial $10-million payment in the Shenglong transaction, and to start operational activities at the Chinese firm’s Congolese projects.

“Given the difficulties associated with traditional equity capital for junior resource companies these days, we are seeing more and more focus on alternative instruments, which suits AusAmerican, given that the current and forecast operations of the Moubiri mine demonstrate strong cash flow from day one, and support the company raising debt,” said AusAmerican executive chairperson Peter Landau.

“We are targeting the bond issue to sit alongside a prepaid offtake facility, which would mean that the company will deliver the funds required to fund the initial $49-million of the Shenglong transaction. The bond issues also deliver a more balanced debt profile managed over a longer timeframe.”

Landau noted that the bond notes diversified the company’s funding sources and gave it greater certainty over the short to medium term.

AusAmerican was looking to acquire a 77.58% shareholding in Shenglong for a total of $103.44-million, which would be paid to the vendor over a two-year period, starting this year.

Shenglong owns Congolese company Societe Lulu de Mine, which, in turn, holds a 90% interest in the two polymetallic exploitation permits that include the Moubiri direct shipping ore (DSO) project and the Mindouli copper project.

The Moubiri project is a copper/lead/zinc DSO asset currently producing at a rate of 50 t/d, and Landau believed that the company could ramp up production to around 200 t/d in the short-term with a capital investment of A$2-million, to provide significant cash flow margins for the company.

The project could further increase production to 500 t/d with further investment.