(IDEX News) - Petra Diamonds Limited said it is aiming to raise approximately $178 million with a fully underwritten rights issue aimed at reducing its interest payments "to a more sustainable level, strengthen the balance sheet and increase the financial flexibility of the Group."
"Petra has managed to execute its strategy within the constraints of its existing resources and has successfully delivered on the majority of milestones associated with its development plans across the portfolio. However, certain operational delays and business challenges, including the impact of a much stronger rand versus the US dollar, which strengthened from a low of ZAR14.47:USD1 in November 2017 to a high of ZAR11.55:USD1 in February 2018, have impacted the company's financial position. The net proceeds from the rights Issue will be used to accelerate a reduction in leverage."
Petra's directors propose to issue 332,821,725 Rights Issue Shares.
Up to $120 million of the net proceeds will be used to fully pay down outstanding drawn indebtedness with the South African Lending Group, including ca. $80 million drawn under the Revolving Credit Facility and up to ca. $40 million outstanding under the Working Capital Facility, whilst retaining both of these facilities (thereby realizing cash interest savings of ca. $12.9 million per annum). The balance of the net proceeds will provide additional working capital in relation to operating expenses in light of the prevailing volatility of the US dollar/rand exchange rate.
Adonis Pouroulis, Chairman, commented: "This Rights Issue has been identified by the Board as the best way of accelerating a reduction in leverage to a more sustainable level, thereby enabling management to focus on ongoing operational delivery and optimization, as well as assisting in mitigating short-term issues relating to currency volatility and other ongoing business challenges.
Johan Dippenaar, Chief Executive, said: "Whilst Petra has successfully delivered on the majority of milestones associated with our expansion programs, cash flow generation over the last two years has been impaired by a combination of the operational delays in FY 2017, combined with a number of business challenges experienced in the first half of FY 2018. These factors, in conjunction with the impact of a much stronger rand versus the US dollar, have led to the company's debt levels being higher than anticipated and have impacted its ability to deleverage in line with expectations.
"By improving the group's financial and operational flexibility, the board believes this rights Issue is in the best interest of its shareholders, positioning Petra to reap the benefits of this capital intensive phase by moving the focus to cost efficient production from the new undiluted mining blocks, with a reduced capital spend profile."