Appointment of Administrator and Restructuring Update

PERTH, Australia, Feb. 25, 2014 /CNW/ - Mirabela Nickel Limited (Mirabela or the Company) (ASX: MBN) advises that Martin Madden, Clifford Rocke and David Winterbottom of KordaMentha have been appointed as Joint and Several Voluntary Administrators by resolution of the Board of Directors earlier today. The appointment of Joint and Several Voluntary Administrators is an important and necessary mechanic in progressing the Proposed Recapitalisation described below.

The Company continues to have the full support of the ad-hoc group of holders (Ad‑hoc Group) of the Company's US$395.0 million 8.75% Senior Unsecured Notes due 15 April 2018 (Notes), who have entered into a legally binding plan support agreement (PSA). The execution of the PSA establishes a framework for the proposed recapitalisation of the Company (Proposed Recapitalisation), subject to the satisfaction of the terms and conditions of the PSA. The PSA is available in the 'Investors' section of the Company's website and is also annexed to this announcement.

It is intended that the Company's operations at the Santa Rita Nickel mine will continue as usual during the administration. As disclosed in the Company's press release of 24 December 2013, the Company is pursuing a reduced mining volume in 2014 and 2015 of 25 million tonnes of waste and ore per annum.

Upon the consummation of the Proposed Recapitalisation, the Company and its subsidiaries' debt obligations, other than (i) the Notes and any guarantees thereof and (ii) the NSD (as defined below), will remain in place. The Proposed Recapitalisation is contingent upon Mirabela Mineração do Brasil Ltda. (Mirabela Brazil) agreeing to the continuation of credit facilities with Banco Bradesco S.A. and Caterpillar Financial Services Corporation on terms acceptable to the Ad‑hoc Group.

At the end of the Proposed Recapitalisation process, the Company intends to apply for its suspension on ASX to be lifted.

Pursuant to the PSA, the key terms of the Proposed Recapitalisation include the following:

  • the claims of the holders of Notes (Noteholders), including any guarantees thereof, shall be compromised and extinguished in exchange for their pro rata share of (i) 54.4% of the ordinary shares of reorganized Mirabela (Mirabela Ordinary Shares) on a fully-diluted basis (pro forma for the conversion, following the consummation of the Proposed Recapitalisation, of the Convertible Secured Notes described below) and (ii) a US$5.0 million subordinated unsecured note with a 30-year maturity and a payable-in-kind interest rate of 1.0% per annum;
  • existing Mirabela shareholders shall not receive any consideration in the Proposed Recapitalisation (other than retaining a de minimis percentage of Mirabela Ordinary Shares following the consummation of the Proposed Recapitalisation); and
  • the Company shall raise US$115.0 million of new capital (New Capital) through the issuance of secured notes (Convertible Secured Notes) convertible into Mirabela Ordinary Shares. All Noteholders shall be given the opportunity to subscribe to the New Capital. Upon the consummation of the Proposed Recapitalisation, prior to the accretion of the payable-in-kind interest described below, the Convertible Secured Notes shall be convertible into 42.3% of Mirabela Ordinary Shares on a fully-diluted basis.

Pursuant to the PSA, the Proposed Recapitalisation will be effectuated pursuant to a recapitalisation and restructuring plan to be implemented through (i) a deed of company arrangement in Australia (Deed of Company Arrangement), which will bind all Noteholders and shareholders, and (ii) an extrajudicial reorganization proceeding to be filed by Mirabela Brazil before the competent Brazilian court (Brazilian Extrajudicial Reorganization), which will bind all Noteholders. The Brazilian Extrajudicial Reorganization is necessary to implement the arrangements contemplated in the PSA with respect to the Notes and will not affect any other creditors of Mirabela Brazil. Implementation of the Proposed Recapitalisation will be conditional on, among other things, obtaining certain regulatory relief from ASIC and ASX.

Pursuant to the PSA, the Company's debt obligations under the Syndicated Note Subscription Deed dated as of 24 December 2013 (NSD) of approximately US$60.0 million (comprising US$45.0 million principal plus capitalised interest and fees) shall be converted into Convertible Secured Notes and shall reduce the amount of the New Capital on a dollar-for-dollar basis. The Noteholders that provided funding under the NSD (Lenders) will be paid a fee of 5.0% (Rollover Fee) (payable in Mirabela Ordinary Shares) of their pro rata share of the US$60.0 million for converting their commitment under the NSD into Convertible Secured Notes.

Additionally, pursuant to the PSA, certain members of the Ad‑hoc Group (Backstop Parties) have agreed to backstop the balance of US$55.0 million of the New Capital in the form of a new money investment. A new capital fee of 10.25% (New Capital Fee) (also payable in Mirabela Ordinary Shares) will be payable to the Backstop Parties based on such members' backstop commitments.

Upon the consummation of the Proposed Recapitalisation, the Rollover Fee and the New Capital Fee will collectively amount to 3.3% of Mirabela Ordinary Shares on a fully-diluted basis (pro forma for the conversion of the Convertible Secured Notes).

Pursuant to the PSA, the Convertible Secured Notes will:

  • have an interest rate of 9.5% per annum, payable in-kind on a semi-annual basis;
  • have a term of 5 years; and
  • be secured by a first-priority lien on all of the collateral securing the NSD, as well as by any additional unencumbered assets (subject to exceptions to be agreed).

The Company and the Ad‑hoc Group evaluated other alternatives before determining to proceed with the Proposed Recapitalisation, including a sale of a controlling interest to another stakeholder in the Company, but determined that no other alternative provided a greater potential recovery to creditors than the Proposed Recapitalisation.

Although the Ad‑hoc Group firmly believes that the implementation of the Proposed Recapitalisation is feasible, there is no assurance that it will be concluded. The PSA is subject to several termination events, including, but not limited to, (i) the failure to achieve certain milestones relating to the Deed of Company Arrangement and Brazilian Extrajudicial Reorganization by certain dates, (ii) a material adverse change in the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries and (iii) the failure by a Backstop Party to honour its backstop commitment (subject to a replacement backstop commitment being provided by another Backstop Party).

As at the date of this announcement, Mirabela has cash on hand and on deposit of US$31.9 million and nickel concentrate inventory of approximately 4,976 dry metric tonnes.

On 27 December 2013, Mirabela entered into a short-term contract with an international trading firm for the sale of 50% of Mirabela's entire quantity of nickel concentrate produced from 1 January 2014 to 31 March 2014 at an estimated quantity of approximately 16,500 wet metric tonnes of nickel concentrate during Q1. The contract expires on 31 March 2014.

This disclosure is being furnished to comply with Mirabela's obligations under applicable legislation and should not be regarded as an indication that Mirabela or any other person considered, or now considers, this information to be predictive of actual future results, and does not constitute an admission or representation by any person that such information is material, or that the expectations, beliefs, opinions and assumptions that underlie these materials will remain the same as of the date of this disclosure. The information contained in these materials may be or have been superseded by subsequent developments. Readers are cautioned not to place undue reliance on these materials. The financial information reflected in this disclosure does not purport to present Mirabela's financial condition in accordance with accounting principles generally accepted in Australia, Brazil, the United States or any other country. Mirabela's independent accountants have not audited or performed any review procedures on this disclosure (except insofar as certain historical financial information may have been derived in part from Mirabela's historical annual financial statements).

DISCLAIMER – FORWARD-LOOKING INFORMATION

Certain information in this document, including all statements that are not historical facts, constitutes forward-looking information within the meaning of applicable Canadian & Australian securities laws. Such forward-looking information includes, but is not limited to, information which reflects management's expectations regarding Mirabela's results of operations.

In making and providing the forward-looking information included in this document, the Company has made numerous assumptions. These assumptions include among other things: (i) assumptions about the price of nickel and other base metals; (ii) assumptions about operating costs and expenditures; (iii) assumptions about future production and recovery; (iv) that the supply and demand for nickel develops as expected; (v) that there is no unanticipated fluctuation in interest rates and foreign exchange rates; and (vi) that there is no material deterioration in general economic conditions. Although management believes that the assumptions made and the expectations represented by such information are reasonable, there can be no assurance that the forward-looking information will prove to be accurate. By its nature, forward-looking information is based on assumptions and involves known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance or achievements, or results, to be materially different from future results, performance or achievements expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include among other things the following: (i) decreases in the price of nickel and copper; (ii) the risk that the Company will continue to have negative operating cash flow; (iii) the risk that additional financing will not be obtained as and when required; (iv) material increases in operating costs; (v) adverse fluctuations in foreign exchange rates; (vi) the risk that concentrate produced will not meet certain minimum specifications; (vii) production estimates may not be accurate; (viii) environmental risks and changes in environmental legislation; (ix) and failure to comply with restrictions and covenants under its debt arrangements.

The Company's MD&A and the Annual Information Form contain information on risks, uncertainties and other factors relating to the forward-looking information. Although the Company has attempted to identify factors that would cause actual actions, events or results to differ materially from those disclosed in the forward-looking information, there may be other factors that cause actual results, performances, achievements or events not to be anticipated, estimated or intended. Also, many of the factors are beyond the Company's control. Accordingly, readers should not place undue reliance on forward-looking information. All forward-looking information disclosed in this document is qualified by this cautionary statement.

SOURCE Mirabela Nickel Ltd.