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London Mining declares dispute with Glencore over payment

22nd September 2014

By: Natalie Greve

Creamer Media Contributing Editor Online

  

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JOHANNESBURG (miningweekly.com) – London Mining has entered into a dispute with multinational commodity miner Glencore over what the iron-ore group says is Glencore’s refusal to pay a cash prepayment amount stipulated in an offtake agreement between the two parties.

According to fund advisor Liberum, Glencore had failed to roll over credit as part of the $27-million revolving facility associated with its 1.8-million-ton offtake agreement.

London Mining said on Monday that it was considering the options available to it under its offtake deal with Glencore, including a termination of the agreement. 

The miner was, meanwhile, in discussions with its core lender to provide the required short-term replacement liquidity. 

“We continue to receive strong interest in our offtake, including prepayment financing, and have received expressions of interest from a number of parties to reallocate uncommitted offtake and provide further funding for the company in the event that the position with Glencore cannot be resolved. 

“In the meantime, discussions with potential strategic partners are continuing and are being accelerated,” it said in a statement.

The group had, meanwhile, signed a term sheet with Afreximbank for a $30-million revolving two-year pre-export financing facility on terms that were similar to those of London Mining's original corporate facilities. 

The facility had received credit approval from Afreximbank but was subject to credit approval by the company's existing lenders. 

“All these discussions are ongoing, although there is no certainty, at this time, that arrangements can be put in place for such replacement financing.  The company's lenders remain supportive,” stated London Mining.

Commenting on the announcement, Liberum said that, while the best-case scenario would be a resolution with Glencore, another outcome could be the acceleration of discussions with strategic shareholders, although, in the current environment, terms would undoubtedly be squeezed.

“In some respects, we are reminded of the Katanga situation in 2009, where Glencore ultimately provided rescue funding by way of an additional $100-million of financing at heavily dilutive terms for Katanga shareholders.

“The relative advantage for London Mining here is that indications of interest have already been received as part of the strategic partner process and some competitive tension could provide a better outcome for shareholders,” it stated.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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