Northern Cape-focused copper mining company Copper 360 will undertake a rights offer of R1.15-billion, comprising new equity of R400-million and debt conversion of up to R750-million.

This forms part of the company's efforts to restructure by raising sufficient funding for short- and medium-term growth, reducing the debt burden to improve profitability and mining several orebodies that have achievable growth potential.

The board of directors has entered into a series of agreements regarding the recapitalisation of the company and the restructuring and conversion of long-term debt instruments on its balance sheet and the reduction of revenue-based royalty payments.

Copper 360 intends to raise R400-million of new equity from existing shareholders at a price of 50c per ordinary share. This equity capital raise has been underwritten by clients of, and funds managed by, Differential Capital in the amount of R260-million. The minimum subscription for the equity capital raise will be R350-million.

The company points out that the equity capital raise will result in the issue of 800-million new ordinary shares. 

Copper 360 notes that the company's transition from an exploration company to a copper producing junior miner requires additional capital.

"The capital secured . . . will not only enable the sustainable long-term profitability of the company, but will also provide the growth capital required to enable the company to grow in stages, initially reaching 40 000 milled tonnes a month within 12 to 18 months, with further growth to 60 000 milled tonnes a month within 24 months," it adds.

The copper miner further points out that the company's balance sheet has been heavily geared for some time.

"It became apparent that not only the gearing level but also the funding cost of the debt instruments were unsustainable and made the company's ordinary shares unattractive as an investment. The restructuring of the debt instruments creates a stronger balance sheet, geared for growth; and results in a simplified capital structure with the rewards of profitable trading largely falling to ordinary shareholders," it outlines as the rationale for the debt conversion.

The company has reached agreement with the holders of the debt instruments in terms of which the parties have agreed to the conversion and/or amendment of the debt instruments in return for the issue by the company of ordinary shares.

Copper 360 expects a maximum of 1.5-billion new ordinary shares to be issued as part of the debt conversion.

It notes that, as a result of the debt restructure, the overall charge related to debt instruments will reduce from about 9.8% on current revenue and operations to 0.7% once 100 000 milled tonnes a month is achieved.

Reflecting on the company's prospects going forward, Copper 360 says the proceeds from the first recapitalisation subscription under the equity raise will provide it with sufficient funding to complete the development of the Rietberg mine and commence the startup of a second mine, while also allowing for the completion of a second modular flotation plant.

Copper 360 CEO Graham Briggs in June told Mining Weekly that although some stakeholders might be concerned about the company's future, the company is not struggling or failing, but rather a "resource-rich, lightly-capitalised exploration company that has only recently begun its transition to production".