IVERNIA West, which has a 50 per cent stake in the Lisheen zinc/lead mine in Co Tipperary, is to raise £41 million in a rights issue. The money will be used to fund its share of the mine's development costs and to repay existing debt.
The issue has been underwritten by Riada Corporate Finance and is being issued on the basis of one new unit of non-interest-bearing convertible unsecured loan stock, at a price of 80p per unit, for every one ordinary share held.
Payment is in two equal instalments: 40p immediately and the remaining 40p at the company's discretion, but no earlier than the granting of planning permission for the mine and no later than July 1st, 1998. The units will be automatically converted into new ordinary shares of 10p each when the second instalment is made. The shares were last dealt in at 90p.
Minorco, which owns 23.9 per cent of
Ivernia, has given an irrevocable undertaking to take up its full rights. They will cost Minorco £9.9 million. Minorco has a direct SO per cent take in the Lisheen project and is its operator.
Part of the proceeds from the rights issue will be used to pay off debt, with Minorco being repaid 12 million (£7.5 million) and Barclays Bank $3 million (£1.8 million), said Mr David Hough, chief executive of lvernia.
The company, he said, will have a debt equity ratio of 70/30. Borrowings will amount to around £56 million. The rights will be sufficient to fund Ivernia's share of the development and there will be no further rights issues, he added.
Mr Hough said his board "believes that the Lisheen mine will generate substantial revenues, profits and cash flow throughout its life, and we see the mine becoming a major supplier of zinc concentrates to the European and world metal markets".
A feasibility study indicated a deposit containing some 17.7 million tonnes, grading 13 per cent zinc and 2.2 per cent lead. That study is based on a mining production rate of 1.5 million tonnes per day giving the mine a life of 13 years. Production of the zinc and lead concentrates is estimated, to average 300,000 tonnes per annum, which would make it the largest zinc/lead mine to be developed in western Europe in recent years.
The total development cost of the project is estimated at $247 million (£154 million). It is to be financed by a combination of debt and equity.
Ivernia and Minorco Lisheen applied to Tipperary County Council for planning permission to develop the mine in January. Ivernia said this is expected to be successful, meaning now is the appropriate time to seek funds from shareholders.
Production start-up is planned for the fourth quarter of 1998. Around 750 people will be employed during development stage, with 380 employed when the mine is in full production.
A "generous dividend policy" is anticipated. Dividends could start to flow shortly after production starts, Mr Hough said.
