Newfield Resources Ltd (ASX:NWF) is set to retire $40 million worth of corporate bonds debt and increase its available capital while it advances the Tongo Diamond Mine development in eastern Sierra Lione.
The diamond developer and explorer is also out to raise $12.5 million through a firm commitment and underwriting program in a move that will further strengthen its balance sheet.
By retiring the corporate bonds, Newfield is set to save on years of annual interest payments, while the outstanding $2.1 million in accruals will be settled with an options issue.
Increasing capital for Tongo
Speaking to the raise, Newfield executive director Karl Smithson said: “The directors are very pleased with the successful negotiation, led by the company’s corporate advisor, Townshend Capital, to capitalise a majority of its outstanding bond debt and accumulated interest.
“Furthermore, the additional $2.5 million firm commitment from a sophisticated investor, and the $10 million underwriting arrangement, made as part of the shortfall from the company’s recent rights issue, provide further capital to advance the Tongo Mine development.
“This corporate debt for equity restructuring and further capital raise not only strengthens our balance sheet but removes our obligation to repay approximately $5 million of interest on an annual basis and over $15 million for the remaining life of the corporate bonds.
“The retirement of the bonds for equity underscores the confidence of the bondholders in the future of Newfield as we advance the Tongo Mine towards production.
“The board remains very grateful for the continued support of all stakeholders.”
Corporate bond retirement
Newfield first struck up binding agreements to secure the corporate bonds — valued at roughly US$30.5 million at the time — in July 2019, when it reached a final investment decision for the Tongo diamond mine.
Now, AUD corporate bonds with a face value of $15 million will be converted to equity thanks to the issue of nearly 43 million fully paid ordinary shares at $0.35 each.
The USD corporate bonds will be handled in the same way, with US$7.5 million worth of bonds converted on the issue of just under 30 million Newfield shares at the same price.
The remaining US$10 million in USD corporate bonds will be repaid in cash from the explorer’s existing reserves.
To deal with roughly $2.1 million in accrued interest across the corporate bonds, Newfield plans to issue almost 25 million unquoted conversion options, exercisable at $0.50 each with a two-year expiry.
Notably, the $0.35 issue price for conversion shares is the same as the price at which shares were offered under the rights issue announced on September 15, 2021.
As long as all conditions are me, settlement of the repayment arrangements is expected on or around January 4, 2022.
Once all the conversion shares and options are issued, all of Newfield’s rights and obligations under the bond agreements will be discharged.
Capital raise
Back in September, Newfield announced a non-renounceable rights issue to raise up to $50.86 million.
On November 8, the company announced it had raised just shy of $25 million thanks to subscriptions for 71.35 million new shares.
Now, together with Townshend Capital, the diamond explorer is out to place the shortfall from the offer under a placement.
Newfield has since received firm commitments from a sophisticated investor to raise a further $2.5 million by placing around 7.14 million shares at $0.35 each.
In addition, Townshend and Newfield have entered a partial underwriting agreement to raise up to $10 million in the shortfall placement.
More than 28.5 million placement shares will be issued at the same price as conversion shares.
Ultimately, the underwriting arrangement and the $2.5 million shortfall placement are intended to replace Newfield’s cash reserves, which will be applied to repay US$10 million of the USD corporate bonds.
The underwriting placement is expected to occur on or before February 4, 2022, while Townshend is entitled to a fee representing 5% of the underwritten amount.
About Newfield
Newfield Resources is a resource company with a diamond mine under construction in Sierra Leone and highly prospective exploration licences in Liberia.
The company’s flagship asset is the highly endowed Tongo Diamond Mine, in eastern Sierra Leone.
After completing a front end engineering and design (FEED) study in 2019, Newfield has progressed its mine development through 2020, completing significant surface and underground infrastructure.
The mine’s underground development is focused on accessing kimberlite stopes to commence commercial production.
This work has already achieved 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.
