New | MMG marks biggest intraday drop in a year after unveiling HK$4 billion rights issue
The stock plummeted by as much as 12.2 per cent to HK$1.8, its biggest intraday decline since August 24 last year. It closed 11.7 per cent lower on Wednesday at HK$1.81.
The Melbourne-based company, whose Las Bambas copper mine in Peru only began production this year after US$9.7 billion was spent on its takeover and construction in the past two years, said it was raising a further HK$4 billion through a rights issue.
“A rights issue is the most equitable means of raising funds as it provides all shareholders
with an opportunity to participate in the offer,” chief executive Andrew Michelmore said in a filing to the Hong Kong bourse late on Tuesday. “The rights issue represents a meaningful step as the company seeks to reduce gearing.”
The firm has proposed to issue one new share for every two existing shares held at HK$1.50 each, a 26.8 per cent discount to Tuesday’s closing price of HK$2.05.
MMG said it planned to use HK$3.2 billion of the proceeds to repay debt and HK$718 million to finance project development.
At the end of June, the company had net debt of US$1.1 billion, amounting to 129 per cent of its shareholders’ equity. After the rights issue, the ratio could fall to about 50 per cent, based on the firm’s plan, according to calculations by the South China Morning Post.
MMG’s parent China Minmetals, which owns 73.7 per cent of MMG, has undertaken to take up the offer.
Besides raising funds through share sales, MMG said it had “formally” started a process to sell the Golden Grove zinc and copper mine in Western Australia and the decommissioned Century zinc mine in Queensland to further help its debt reduction effort.
The company is developing the Dugald River zinc mine in Queensland, which is expected to start production in the first half of 2018 and will partially offset the loss of output due to the closure of the Century mine.
As of July, a further US$600 million to US$620 million was needed to complete construction, which was 28 per cent finished at the end of September, after US$766.9 million has been spent since 2013, according to MMG.
With a designed annual output of 170,000 tonnes of zinc metal contained in concentrate, the Dugald River mine was expected to be one of the world’s largest zinc mines when commissioned, the firm said. Its ore contains an average of 13.2 per cent zinc metal per tonne of raw ore.
A US$462.6 million impairment loss was booked on the project last year due to a fall in metal prices.
