Anaconda Nickel tables debt plan

Australian-based Anaconda Nickel has reached a deal that will see its secured creditors receive US$190 million in cash, or about US25 on the dollar, for the outstanding secured debts of its wholly owned subsidiary, Murrin Murrin Holdings (MMH), and Switzerland-based Glencore International. Glencore is Anaconda’s 40% joint-venture partner in the Murrin Murrin nickel mine in Western Australia.

The creditors will also get A$35.8 million, representing 90% of the A$39.8 million awarded by arbitrators to the joint-venture partners for their first claim against U.S.-based Fluor Daniel for problems plaguing the screening and acid-leach circuits at Murrin Murrin.

A second phase of the arbitration will consider a further A$160 million in Anaconda claims (related to refining areas of the plant) against Fluor. The process is expected to take up to a year. The secured creditors will get 75% of any award, with 60% of that going to MMH’s secured creditors, and the rest going to Glencore’s secured creditors.

The plant at Murrin Murrin employs Sherritt International‘s (S-T) technology for extracting nickel from low-grade lateritic ore. The project is well behind the originally estimated startup date of early 2000. Earlier this year, a lightning strike hit power transformers knocking out the plant and forcing Anaconda to move forward a scheduled 5-day maintenance shutdown.

The deal has been approved by about half of the secured creditors; still, creditors holding at least 75% of the secured debt must give the nod. The deadline for approval was Sept. 15, though an extension to the end of the month was anticipated.

Murrin Murrin’s secured creditors, the U.S. bondholders who footed most of the mine’s A$1.6- billion development price tag, are owed a total of US$750 million. Murrin Murrin and Glencore together owe half of the US$750-million total. Anaconda’s share is around US$420 million.

Glencore has also agreed to increase Murrin Murrin’s working capital facility to US$25 million from US$10 million to keep the operation running and fund the second phase of arbitration. The cost of the arbitration will be split proportionally between the recipients of any award.

Anaconda, whose major shareholders include Glencore (with 33.8%) and Anglo American (AAUK-Q) (with 23.7%), will execute a renounceable rights issue to fund the planned debt restructuring and company recapitalisation. The company says the rights issue is likely to be made at a significant discount to the current share price.

Meanwhile, fellow outback miner Preston Resources announced that Barclays Bank and other secured creditors have acquired 95% of its Bulong nickel operations in Western Australia. The deal is aimed at clearing up the company’s debt and allowing it to re-list on the Australian Stock Exchange. The shares have been suspended since October 1999, pending a financial restructuring.