Iron ore major National Mineral Development Corporation (NMDC) is likely to spend A$12.1 million to subscribe a rights issue planned by its Australian arm, Legacy Iron Ore, in which NMDC is a major shareholder. NMDC acquired 48.8% stake in Legacy Iron in 2011.
According to a filing with Australian Securities Exchange (ASX), Legacy said it plans to raise A$25 million by way of rights issue and NMDC, as majority shareholder, is expected to acquire shares under the 'entitlement offer', equivalent to its 48.8% stake.
"Legacy Iron's major shareholder NMDC has confirmed its commitment to take up its full entitlement under the entitlement offer which will raise a minimum amount of approximately Au$12.1 million. NMDC's participation under the entitlement offer is subject to approval from the Foreign Investment Review Board. NMDC has lodged an application for approval with FIRB," Legacy informed ASX.
Further, Legacy informed ASX it plans to issue 'a 3 for 1 pro rata non-renounceable entitlement offer' to its shareholders. Under the entitlement offer, each shareholder will be offered an opportunity to purchase three new shares for one existing Legacy Iron share held by them as on July 22. The offer price has been fixed at 1.4 cents per new share.
Non-renounceable entitlement offer is an offer issued by a company to its shareholders to purchase more shares of the corporation (usually at a discount). Unlike a renounceable right, a non-renounceable right is not transferable, and therefore cannot be bought or sold.
Though Legacy Iron planned the rights issue last year, the same was withdrawn citing poor market conditions. "The proceeds from the entitlement offer will be applied towards the ongoing development of the Mt Bevan iron ore project, repayment of A$3 million Citibank loan facility and further exploration and development work across Legacy Iron's iron ore and other assets," Legacy said.
Mt Bevan is considered to hold excellent potential for the definition of substantial direct shipping ore hematite and magnetite iron resources that are located close to existing road, rail and port facilities. The move comes after a site visit to Mt Bevan in Western Australia by the NMDC board members.