The Aussie twin to Breakwater....
Hopes for new Swiss look at Western Metals
Bruce Hextall
Page 20 ( 502 words )
Wednesday, 24 Feb 1999
From section: Companies And Markets
Publication: Australian Financial Review
Western Metals Ltd institutional shareholders are hoping Swiss-based
Glencore International AG will take another look at the company following a
plunge in the Western Metals share price because of fears of a cash squeeze.
The aggressive Perth-based group, which made a successful $288 million
cash bid for Melbourne resources group Aberfoyle Ltd, is under pressure to
find another $32 million to complete its purchase of 45 per cent of the high-
returning Thai zinc producer, Padaeng Industry Public Co.
But weak zinc prices mean investors are concerned they will be the first to
suffer if the expansion plans go off the rails. They rank behind the institutional
shareholders, who took up a preference share issue arranged by Macquarie
Bank to fund the Aberfoyle bid.
Ordinary shareholders, concerned about unsuccessful moves by the company
to raise extra equity funds, have been bailing out of Western Metals, sending
the stock down as low as 49¢ this week.
They also fear their holdings might be diluted if preference shareholders
convert their holdings early.
Western Metals finished slightly firmer at 51¢ yesterday after 5.5 million
shares traded. Brokers said there now appeared to be some support at the
lower level.
The stock plunged from 76¢ a week ago after Western Metals' bank pulled
out of supporting a placement at 60¢ a share. Meanwhile, Glencore's listed
Spanish zinc subsidiary, Asturiana de Zinc, which offered $257.7 million or
97¢ a share to Western Metals shareholders last year, is considered likely to
return to the fray.
Sources close to Glencore, which retains a 4.6 per cent stake in Western
Metals through Asturiana, said no decision had been made.
Although Western Metals, including the now wholly owned Aberfolye, is now
only capitalised at $161 million, they said it would be unlikely that Asturiana
would be as generous as last year.
At the time it said it was not impressed with Aberfoyle's Gunpowder copper
project in Queensland, or Mt Gordon as it has been renamed. The project
took longer than expected to come up to speed, but is now performing well.
Western Metals managing director Mr Rob Webster was unavailable last
night but was understood to be working on options to get Western Metals'
through its cash squeeze. One option would be not to press ahead with
Padaeng deal.
Last week the company admitted low metal prices had squeezed cashflow at
a time when it was completing a takeover and commissioning two new mines.
Mr Webster said at the time the company was exploring a number of equity
options.
Meanwhile, it has been negotiating to restructure its debt. Last week it said
negotiations were well advanced with four parties.
Western Metals is yet to report its December half net profit, but expects to
report a $2.3 million profit before tax. |
