Angus & Ross Keeps Fingers Crossed Over Funding For Black Angel
By Our Man In The City
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Money is the root of all evil for Angus & Ross, at least when it doesn't have any. The award of a mining licence in late May for the Black Angel zinc project in Greenland and production targeted for the year-end should have been cause for celebration, but short-term financing problems have dampened the party. Angus & Ross hasn't been able to draw down US$17.5 million from a credit agreement from investment group Cyrus Capital and ended up taking a US$1.65 million three-month loan from the partner at a hefty 14.5 per cent annual interest plus US$150,000 arrangement fee. Chairman Robin Andrews is determined to find some more money in the City, but the stock market doesn't like his chances. The share price has fallen by more than two thirds since January and it seems highly likely that the company will get a new majority shareholder, potentially taking stock at a large discount in order to save the business.
“These are sensitive times,” says Mr Andrews, choosing his words carefully while negotiations continue for a cash injection. “It's a sad situation that a company has a mining licence and engineers on the ground ready to build a cable car system, but we've stopped the construction until more money can be found.”
He calls the situation “thoroughly demoralising” but insists that a solution will be found soon. A logical move would be to sell some of the company's assets which include a large tantalum project in Greenland called Motzfeldt. “This needs US$50 million to get into production, but is rated as the world's largest tantalum deposits, so is obviously attractive to someone,” says Robin. “Our problem is timing as selling assets is not a quick transaction.” Motzfeldt also contains niobium, a commodity that Angus & Ross originally thought was relatively worthless until it recently enjoyed a sharp hike in value. “Niobium has tripled in price, so the project is starting to look quite attractive,' says the chairman.
There's also gold projects in Brazil worth considering, including the Sta Elena which has already started trial mining. An imminent resource statement was flagged at the half-year results in November 2007, but not yet delivered. It is hoping to produce 20,000 ounces of gold a year.
Black Angel is a solid project with considerable exploration upside. Unfortunately, the combination of rising costs and the falling zinc price – slumping to levels last seen in January 2006 – may have prompted Cyrus Capital to reassess its position. It committed a US$30 million debt facility last July. Some money has been taken and US$17.5 million should have been available once it was happy with the bankable feasibility study, which came out in February. For reasons Mr Andrews doesn't want to discuss, Cyrus Capital won't hand over this part of the promised loan yet. It's not a refusal, he insists, merely a delay.
Harsh weather conditions means Angus & Ross will have to stockpile ore for six months during the winter as transportation is restricted. This will require around US$33 million for working capital, to cover the extra time it will take to ship, process and sell the concentrate. The company is trying to secure an off-take agreement to cover the extra funding, but it is an unwelcome addition to the already-long list of financing pressures that include an extra US$11 million of mine development costs.
Mr Andrews was locked in meetings earlier this week with potential financiers and sounded cautiously optimistic about getting the necessary funds for Black Angel to meet its late 2008 start-up date. He needs all the luck he can get, particularly as the share price hits a five-year low. “The market is in for a surprise,” he says. “I think we will be able to refinance.” Shareholders will certainly be praying for the company to sort out its finances as Angus & Ross is only a whisker away from generating revenue. |
