Published: Wednesday January 25, 2012 MYT 8:48:00 AM
MELBOURNE, Jan 24 (Reuters) – Australia’s Lynas Corp is set to raise $225 million from a new investor, giving the rare earths miner a cheaper source of funding to finish building its flagship plant in Malaysia, which is awaiting a licence to open.
Lynas said on Tuesday it now expects the plant to start production in the second quarter, up to five months later than it earlier hoped, assuming it wins a temporary operating licence.
It also said the forecast cost for the first phase of its rare earths project had increased by about 7 percent to A$640 million ($672 million).
Lynas has agreed to sell $225 million in convertible bonds to funds managed by Mount Kellett Capital Management, a firm which specialises in snapping up shares in companies in distressed or unusual situations.
Mount Kellett had approached Lynas with the proposal, a source close to the transaction said.
“We are delighted Lynas accepted our offer to become a significant investor and look forward to participating in the development of the world’s first reliable, sustainable supply chain for rare earth elements outside of China,” Mount Kellett co-founder Jason Maynard said in a statement.
The funds will be enough for Lynas to complete construction and commissioning of the first phase of its rare earths processing plant in central Malaysia, which has been delayed due to environmental protests.
It has secured $50 million up front, with the remainder expected in February.
As a result it will retire a A$125 million working capital facility from JPMorgan Chase and Sumitomo Mitsui Banking Corp, untapped as it had been subject to Lynas winning a licence for its Malaysian plant.
The bond funding is cheaper with an interest rate of 2.75 percent a year.
Malaysia’s Atomic Energy Licensing Board is due to decide on Jan 30 whether to approve a temporary licence for Lynas to commission the plant.
The board’s recommendation will then be submitted to Prime Minister Najib Razak‘s cabinet for final approval of a pre-operating licence for the plant.
There is no timeframe for the government to issue a final decision, and controversy over the plant could spur the government to delay a decision until after national elections, widely expected this year.
The bonds will be convertible at A$1.25 a share, a 2 percent discount to Lynas’s last trade.
Lynas shares were put on a trading halt on Monday, Jan 23, ahead of the funding announcement. Its shares had soared 26 percent to A$1.28 over the previous three sessions. The non-binding terms of the deal were set on Jan 16, when its shares closed at A$1.00.