Deep sea miner Chatham Rock secures 2012 funding

BUSINESSDESK: Would-be deep sea miner Chatham Rock Phosphate has secured funding for its 2012 work programme, bringing on board American private investors under a shares-and-options structure that could deliver a 50 percent shareholding to the newcomers.

CRP managing director Chris Castle said the deal will initially give Subsea Investments II a 19.9 percent stake in the NZX-listed company, which is seeking to replace imported phosphate with product mined from the Chatham Rise.

Subsea would need Takeovers Code waivers or approvals to take a larger stake than that, but the options arrangements announced today could theoretically take it to 50 percent of CRP.

CRP shares have not traded today, but have risen 21 percent in the past week to trade most recently at 23 cents. Castle was in Toronto last week and briefed mining industry analysts on the company’s progress.

However, plans to list on either the Toronto or Australian stock exchanges in the near future were now on hold, thanks to Subsea’s involvement, Castle told BusinessDesk.

“It’s still our intention to do an IPO when market conditions improve,” he said, but the pressure was now off as “we are now effectively funded for 2012.” The project would be “progressively de-risked” to improve both the strike price and prospect of success for an eventual international IPO.

The company has up to $10 million of environmental, geo-technical and other projects on the books as it moves towards applying for a mining licence later this year and to file an environmental impact assessment under forthcoming legislation covering development of resources in New Zealand’s Exclusive Economic Zone.

Little is known publicly of Subsea Investments, except that they are a group of US-based private equity investors whom Castle met recently in Florida for due diligence discussions.

Under the arrangements announced today, Subsea is buying 11.4 million CRP shares for 20 cents apiece to raise $2.28 million, and the same number of unlisted three-year options for exercise on a one-for-one basis at 30 cents a share.

Subject to shareholder approval at a special meeting to be held in early April, the agreement will also see Subsea inject another $370,000 for 1.85 million CRP shares, also at 20 cents each, and a convertible loan to advance up to $3.3 million to CRP, with a further 18.3 million shares options offered for conversion at 20 cents a share, matching the second tranche of shares issued and the value of the loan.

The agreement also provides that Subsea may, but is not obliged to, advance a further $1.2 million to CRP on the same terms and conditions except that the price for conversion to CRP shares will be agreed at the time of an advance, at a price of not less than 20 cents a share.

No options will be issued in connection with that subsequent advance.

All up, the various issues will deliver around $7 million in new capital and loans.

CRP was “delighted to welcome Subsea as a cornerstone investor in the company,” said Castle. “This year’s work programme for CRP is likely to cost $8 million to $10 million and we expect that this investment will ultimately constitute over half of that funding requirement.

“We also now have a number of avenues to pursue to fund the balance of our work programme. Subsea’s investment is therefore a significant and exciting step in securing the future of our rock phosphate project,” he said.