LSE-listed Kenmare Resources, a global producer of titanium minerals and zircon, has signed debt facilities with various financial institutions.
Kenmare operates the the Moma Titanium Minerals Mine in northern Mozambique, and has an agreement with Absa Bank, Nedbank, Rand Merchant Bank and Standard Bank Group among others.
The new debt facilities comprise a US$110 million term loan facility and a US$40 million revolving credit facility.
This, it said, will be used in part to repay in full the existing senior and subordinated project loans, of which US$64 million is outstanding, and for working capital purposes.
The new debt facilities also provide for a future mine closure guarantee facility of up to US$40 million, sharing in security. Rothschild & Co. acted as financial adviser to the company on the transaction
Tony McCluskey, Finance Director, explained that the new facilities will support the continued growth of Kenmare’s business as well as extend the maturity profile of its debt beyond the current short period of increased capital expenditure.
“It is also particularly pleasing to replace the existing project loans with much more flexible corporate facilities, underlining the company’s progress into a leading global mineral sands producer.”
McCluskey added that the company’s planned increase in production volumes by more than 20% from 2021 will enable Kenmare to expand its product margins and position it in the first quartile of the industry revenue to cost curve, as well as to deliver increased cashflow stability.
“The original debt facilities were provided on terms that supported the building of the Moma mine. However, given the strength of core cash flows being generated by the Moma mine, the facilities provided by the new lender group, which includes both new and existing lenders, provide additional financial flexibility and are more suitable for Kenmare’s position as an established producer.”
- New debt facilities provided by existing lenders (Absa and EAIF) and new lenders (Nedbank, Rand Merchant Bank and Standard Bank);
- Proceeds of the initial draw down will be used to prepay in full the company’s existing US$64 million project loans, and to pay fees and costs associated with the financing;
- The new facilities provide the company with additional financial flexibility as a result of the extended maturity profile and increased liquidity;
- Key financial covenants: interest cover ratio of >4.00 times; net debt to EBITDA of <2 times; debt Service Cover Ratio of >1.2 times; and minimum liquidity of US$15 million;
- Distribution covenants: net debt to EBITDA of <1.5 times; and minimum liquidity of US$25 million; and
- Availability of the new debt facilities is subject to the satisfaction of customary conditions precedent, which will be completed as soon as practical.