Boliden to issue shares, retain Chilean assets

Swedish-Canadian miner Boliden (BOL-T) says it will go ahead with a financial restructuring as its board of directors was not able to reach satisfactory terms with Noranda (NOR-T) and Falconbridge (FL-T) for the sale of its Chilean assets.

On Tuesday, Falconbridge warned the cash-strapped Boliden of Falco’s contractual right to acquire Boliden’s stake in the Lomas Bayas copper mine and the adjacent Fortuna de Cobre property. Nonetheless, Boliden has announced the details of its restructuring. They include:

• a common share rights offering of US$114 million, at US20 per share, to existing shareholders — the proceeds would be used to finance the company’s operations;
• a common share offering of US$150 million at US20 per share (with US$50 million to certain Swedish financial institutions and US$100 million to certain of the company’s lenders) — the proceeds would be applied to the company’s bank debt; and
• a proposal to the company’s lenders to refinance and reschedule the remaining bank debt under a new credit facility.

Each transaction is conditional upon the contemporaneous completion of the others.

On completion of the transactions, Boliden will restructure its board of directors to include members of the Swedish business and investment communities. The company also plans to move its headquarters back to Sweden.

Boliden intends to complete the offerings by mid-July. If its shareholders exercise their full entitlements under the offerings, they will continue to own about 84% of the company.

A condition of the restructuring is that Boliden retain its interests in the Lomas Bayas solvent extraction-electrowinning copper operation and the Fortuna de Cobre copper deposit. The company plans to refinance Lomas Bayas.

In February, Noranda and Falco agreed to buy the Chilean divisions of Boliden which hold these assets for US$175 million in cash less outstanding third-party debt obligations of US$112.7 million, plus a further US$15 million should the buyers exercise their right to the Fortuna de Cobre copper deposit within five years.

Falco said it is reviewing Boliden’s decision.During the first quarter of 2001, Boliden posted a net loss of US$25.1 million (or 11 per share), up from a net loss of US$18.1 million (18 per share) a year earlier. The company’s mines operated at a loss of US$8.4 million, while the smelting division generated operating income of US$2.3 million. Foreign currency hedge contracts took an US$18-million bite out of operating results in the quarter.