Bank of China provides ZAR 500 million loan to IFMSA for working capital purposes

Project narrative

On May 22, 2002, International Ferro Metals (SA) Proprietary Limited — also known as International Ferro Metals (SA) (Pty) Limited and IFM SA and IFMSA — was legally incorporated as a special purpose vehicle and joint venture of China’s Jiquan Iron and Steel Company (Jisco) [29.1% ownership stake] and Australia’s AIM-listed International Ferro Metals Limited (IFM) [70.9% ownership stake]. Then, on June 29, 2009, International Ferro Metals (SA) Proprietary Limited signed a ZAR 500 million facility agreement with Bank of China for working capital purposes. The loan carried a 3-year maturity (final maturity date: June 25, 2012). The initial drawdown currency split was expected to be 60% in USD and 40% in ZAR. USD drawdowns carried interest at a rate of LIBOR plus a 1.5% margin and ZAR drawdowns carried interest at South African Prime rates plus a 1.9% margin. IFMSA pledged its property, mineral rights, plant, equipment, and balance sheet as sources of collateral. The carrying value of the property, mineral rights, plant and equipment was ZAR 1.89 billion as of June 30, 2014 and ZAR 0.3 billion as of June 30, 2015 (2014: ZAR 1.89 billion). IFMSA’s parent company (IFML) also issued a corporate guarantee in support of the loan. The borrower was expected to use the proceeds of the loan to flexibly manage its liquidity position and fund the higher working capital requirements arising from a higher level of production. As of June 30, 2011, ZAR 315 million had been disbursed through the facility. The facility was apparently rolled over several consecutive times after its originally scheduled maturity date. IFMSA fell into financial distress after it suffered from a downward trend in its operations and profitability. As a result, the company entered into business rescue in August 2015 owing to deteriorating business conditions impacting on its Lesedi mine and ferrochrome smelting operations. IFMSA reported a loss before tax of ZAR 176 million for the half-year ending on December 31, 2014. Then, in August 2016, as part of a ‘business rescue’ process, IFML sold IFMSA to Samancor Chrome Limited for ZAR 300 million, with the balance of ZAR 10 million payable upon transfer of the immovable properties.