JOHANNESBURG (miningweekly.com) – JSE-listed Aquarius Platinum on Monday announced its intention to buy back between $150-million and $225-million of its $300-million convertible bonds due on December 18, 2015.

The settlement of this tender offer for Aquarius’ convertible bonds would be funded by proceeds raised by a proposed rights issue of new common shares in the company valued up to $225-million.

Should the proceeds raised by the rights issue exceed the amount required to settle the tender offer, Aquarius would retain the surplus funds raised to improve liquidity to fund the redemption of remaining convertible bonds not validly tendered and repurchased, the company said in a statement. 

Fund manager Liberum Capital stated that this restructure was vital for Aquarius given that the company was cash-flow destructive at the current platinum group metals (PGMs) basket price.

“[Through the transaction] the company’s gearing level will be taken from 77% to somewhere between 16% and -1%. The transaction will also be heavily dilutive for equity holders, with the raise equivalent to 52% to 78% of current market capitalisation. 

“Degearing the balance sheet will lower financing costs by $6-million to $9-million, as well as allow Aquarius to pursue small capital efficient projects, such as tailing recovery and increasing hoisting capacity at its Mimosa project, in Zimbabwe,” Liberum said.

Further, the fund manager retained its “hold” rating on the company, stating that the market had somewhat expected this restructuring and that Aquarius offered significant operational leverage to a rising PGM market beyond the restructuring.

“However, the company will also continue to face the ongoing challenges of structurally high-cost inflation and the uncertain investment environment in Zimbabwe,” Liberum said.

The Aquarius tender offer opened on April 7 and would expire on April 11, after which the terms of the rights issue would be announced.