Newfield Resources Ltd (ASX:NWF) is set to repay $40 million in corporate bond debt and increase its available capital while advancing the development of the Tongo diamond mine in the east of the Sierra Leone.
The diamond developer and explorer is also set to raise $12.5 million through a firm commitment and underwriting program, which will further strengthen its balance sheet.
By retiring the corporate bonds, Newfield is expected to save on years of annual interest payments, while the $2.1 million in accrued liabilities will be settled by issuing options.
Capital increase for Tongo
Commenting on the raise, Newfield’s chief executive, Karl Smithson, said: “The directors are very pleased with the successful completion of negotiations, led by the company’s corporate adviser, Townshend Capital, to capitalize the majority of its outstanding bond debt and accrued interest.
“In addition, the additional firm commitment of $2.5 million from a sophisticated investor and the $10 million underwriting agreement, entered into in connection with the shortfall of the recent rights issue of the company, are providing additional capital to advance the development of the Tongo mine.
“This corporate debt for equity restructuring and new fundraising not only strengthens our balance sheet, but removes our obligation to repay approximately $5 million in interest on an annual basis and over $15 million for the remaining life of the corporate bonds.
“The redemption of the bonds into shares underscores the bondholders’ confidence in Newfield’s future as we move the Tongo mine towards production.
“The Board remains very grateful for the continued support of all stakeholders.”
Corporate bond retirement
Newfield first entered into binding agreements to secure the corporate bonds – valued at around $30.5 million at the time – in July 2019, when it made a final investment decision for the mine. Tongo diamonds.
Now, AUD corporate bonds with a face value of $15 million will be converted into equity through the issuance of nearly 43 million fully paid ordinary shares at $0.35 each.
USD corporate bonds will be treated similarly, with $7.5 million of bonds converted on the issue of just under 30 million Newfield shares at the same price.
The remaining US$10 million in US dollar corporate bonds will be repaid in cash from the explorer’s existing reserves.
To meet approximately $2.1 million of accrued interest on the corporate bonds, Newfield plans to issue nearly 25 million unlisted conversion options, exercisable at $0.50 each with an expiration of two years.
Notably, the issue price of $0.35 for the conversion shares is the same as the price at which the shares were offered under the rights offering announced on September 15, 2021.
As long as all conditions are met, settlement of repayment terms is expected on or around January 4, 2022.
Once all shares and conversion options have been issued, all of Newfield’s rights and obligations under the bond agreements will be discharged.
Increase in capital
In September, Newfield announced a non-waiver rights issue to raise up to $50.86 million.
On November 8, the company announced that it had raised just under $25 million from subscriptions for 71.35 million new shares.
Now, with Townshend Capital, the diamond explorer is set to place the shortfall in the offering under a placement.
Newfield has since received firm commitments from a sophisticated investor to raise an additional $2.5 million by placing approximately 7.14 million shares at $0.35 each.
Additionally, Townshend and Newfield have entered into a partial bought deal agreement to raise up to $10 million in the shortfall placement.
Over 28.5 million Placement Shares will be issued at the same price as the Conversion Shares.
Ultimately, the bought deal and $2.5 million shortfall placement is intended to replace Newfield’s cash reserves, which will be used to repay US$10 million of corporate bonds in U.S. dollars.
The subscription placement is expected to occur no later than February 4, 2022, while Townshend is entitled to a commission of 5% of the amount subscribed.
Newfield Resources is a resource company with a diamond mine under construction in Sierra Leone and very promising exploration licenses in Liberia.
The company’s flagship asset is the very rich Tongo diamond mine in eastern Sierra Leone.
After completing a preliminary engineering and design (FEED) study in 2019, Newfield has advanced its mine development to 2020, completing significant surface and underground infrastructure.
Underground mine development is focused on access to kimberlite workings to begin commercial production.
This work has already intersected the first kimberlite ore from the Kundu ore reserve, leading to the processing and recovery of the first underground production diamonds from the Tongo mine in December 2020.