Banro eyes US$100M financing to get back on track
Banro (BAA-T, BAA-X) has announced a larger financing package of up to US$100 million mainly to get its delayed Namoya gold project in the Maniema province of the Democratic Republic of Congo (DRC) into production by year end.
Development at Namoya is slightly off-track due to heavy rains that pushed back the construction of the access road, the company revealed on March 7. This caused delays in delivering major plant components to the site as the main 420-km-long access road to Namoya required extensive repair, driving up costs and pushing back first production from mid-year to the fourth quarter.
“Earlier this month we announced a 15% increase in the capital cost of Namoya beyond the original US$181 million [estimate] due to these delays. This brings the total capital cost to US$208 million,” John Clarke, the company’s interim CEO, said on a March 27 conference call. He notes the company has US$84 million remaining of capital expenditures at the project, after investing US$10 million at Namoya in the first quarter.
To ensure the gold producer could bring its second mine into production, while continuing to expand and optimize its Twangiza gold mine in DRC’s South Kivu province, it has ramped up its previously announced financing package. On Feb. 21, it said it was looking to secure up to US$90 million by issuing US$40–$60 million of preferred stocks to BlackRock World Mining Trust and another US$30 million in credit facilities from two commercial DRC banks.
While, Banro has established the two credit facilities for US$15 million each with Rawbank and Ecobank at interest rates of 9% and 8.5% respectively, it has replaced the previous preferred share component with three parts to secure up to another US$100 million.
These components include offering common shares and issuing preferred shares to raise a total of US$70 million on a best efforts basis and closing a US$30 million preferred share private placement with BlackRock.
Proceeds from the common shares are anticipated to range from US$20–40 million, while the preferred shares, priced at US$25 apiece, should bring in a total of US$30–$50 million.
Banro has also received a non-binding commitment from Black Rock to complete a private placement of US$30 million, dependent on the junior concluding the preferred and common shares transactions. These offerings are expected to close in a few weeks, Clarke said, adding the issue of common shares should represent a dilution of less than 10%, leaving some shareholders and analysts concerned.
“The larger financing and dilutive common share component raise concerns regarding the cost overruns at Namoya and near-term operational performance at Twangiza,” Andrew Breichmanas, a BMO Capital Markets analyst, cautioned in a note.
Asked why the company was raising US$130 million, which is more than it needs to complete Namoya, Clarke replied: “The US$30 million (credit facility) is already drawn down, and we are making sure we are well funded for all eventualities to succeed on this project.”
Banro closed the day down 10% to $1.78 on 4.7 million shares traded.