KEY POINTS
- China Nonferrous Mining plans to raise up to $300m through convertible bonds.
- The funds will support overseas copper mining projects.
- The bonds mature in 2031 and offer investors a potential share-conversion option.
China Nonferrous Mining Corporation is preparing to raise up to $300 million through a US dollar-denominated convertible bond issue as the company seeks additional funding for its overseas copper mining operations.
According to a term sheet seen by Reuters on Wednesday, the Hong Kong-listed copper producer plans to use the proceeds to support the construction and development of copper mining projects outside China.
The planned bonds will mature in 2031 and form part of the company’s efforts to secure capital for its international mining expansion.
The convertible bonds will carry no coupon, meaning investors will not receive regular interest payments during the life of the securities.
The bonds are expected to be issued at 100.5% of their face value and redeemed at 100% when they mature, resulting in a yield to maturity of minus 0.10%.
Investors will also have the option to sell the bonds back to China Nonferrous Mining after three years at 100% of their face value. The yield to that put date is estimated at minus 0.17%.
The structure means investors are effectively accepting a small negative yield in exchange for the potential benefit of converting the bonds into shares if the company’s stock price performs strongly.
Conversion linked to China Nonferrous shares
The securities will be convertible into shares of China Nonferrous Mining at a premium of between 21.5% and 31.5% to the company’s reference share price.
The reference price was HK$17.20, equivalent to about $2.19, based on the company’s closing share price on Wednesday.
If the company’s share price rises sufficiently, bondholders could choose to convert their holdings into equity, potentially allowing them to benefit from an increase in the value of the mining company’s shares.
China Nonferrous Mining is seeking to expand its copper production footprint through projects outside China, with the new financing expected to provide capital for project construction and development.
The fundraising comes as mining companies globally seek to secure access to copper resources amid growing demand for the metal from electricity networks, renewable energy infrastructure, electric vehicles and other technologies.
For China Nonferrous Mining, additional funding could help accelerate the development of its overseas assets while giving the company another financing option without immediately issuing ordinary shares.
China Nonferrous Mining had not immediately responded to a request for comment after working hours on Wednesday.
The proposed transaction remains subject to its final terms and execution, but the term sheet provides an indication of the company’s plans to raise significant capital for its international copper operations.
