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Panoramic Resources and Macquarie Group set funding vision ahead of planned production increase

The northern Australian nickel-copper-cobalt producer’s securities were halted as it prepared a capital raising to fund a $20 million debt reduction.

Panoramic Resources Ltd - Panoramic Resources and Macquarie Group set funding vision ahead of planned production increase
Nickel has increased by about $700 a tonne this year

Panoramic Resources Ltd (ASX:PAN) shipped out $23.6 million of concentrate from the Kimberley port of Wyndham in the June quarter after sourcing the material from its Savannah nickel-copper-cobalt operations.

The concentrate was exported in three shipments as the Western Australian company experienced better production and development rates at the northwest WA mining operation.

Panoramic’s shipments ranged from 6,000 to 8,000 wet metric tonnes.

The company produced 1,518 tonnes of nickel, 814 tonnes of copper and 80 tonnes of cobalt in concentrate in the June 2019 financial quarter.

Panoramic has produced 2,484 tonnes of nickel, 1,474 tonnes of copper and 130 tonnes of cobalt in concentrate from the Savannah Nickel Project in the East Kimberley subregion since restarting operations there earlier this year.

Fiscal year sales income is $39.6 million after the company started sending bulk concentrate shipments to China in February 2019.

The timing of a restart to Savannah operations has proved fortunate this year, as the nickel price opened 2019 at less than US$11,000 a tonne and at the weekend the price had moved to a five-year high of US$18,000 a tonne.

Nickel-copper-cobalt producer Panoramic has reported a series of successes from its focus on improving advancement rates at Savannah North, which is expected to be delivering development ore by November 2019 and contributing to production figures by the March 2020 quarter.

Panoramic said advancement rates had improved after the start of a contractor and reaming rates had also improved as it pursued a ventilation rise.

Production levels less than planned

About 47,000 tonnes of ore was extracted each month during the quarter, with average monthly ore production for July and August of about 46,000 tonnes coming in below the targeted production figures of about 60,000 tonnes a month.

Panoramic had experienced reduced availability of some high-grade stopes due after a seismic event in July that caused some ground stress issues.

Tight labour market conditions, reduced remote bogger availabilities and rehabilitation of access drives were also flagged as reasons for reduced production.

The company said its “processing plant continues to perform well with metallurgical recoveries close to budget at 84% for nickel in August”.

Panoramic’s production forecasts for the 2019-20 financial year are now between 9,500 and 10,000 tonnes of nickel, 5,800-6,000 tonnes of copper and 600-650 tonnes of cobalt.

In trading halt

Panoramic is preparing to share details of a capital raising by the start of trade this Thursday.

Its securities were put in a trading halt earlier today until a planned announcement is made to the market.

Financing agreement with Macquarie

Panoramic has been undertaking negotiations with Macquarie Group Ltd (ASX:MQG) (FRA:4M4) (OTCMKTS:MQBKY) business Macquarie Bank Limited and reports that the parties have agreed to more amendments to a Savannah funding facility agreement.

Perth-based Panoramic said the parties had agreed its $40 million outstanding debt to Macquarie should be reduced by $20 million, or 50%, to $20 million using a pro-rata renounceable rights issue.

The remaining $20 million senior debt would then continue to attract the same interest rate as a previous $10 million mezzanine tranche.

A start to loan payback would be deferred one financial quarter to September 30, 2020, with the final repayment quarter also deferred by a quarter, to March 31, 2022.

Panoramic said the adjustments would effectively reduce its minimum liquidity by $7.5 million to zero.

After it ramps up Savannah North, targeted for the June 2020 quarter, project proceeds accounts will need to have the next month’s operating cost available as cash.

Hedging contracts will also be rolled forward, to match the September 2020 to March 2022 quarters repayment period.

No more hedging would be required.

A debt service cover ratio (DSCR) has been removed while pricing assumptions for financial covenants have been improved.

Panoramic last traded at 34 cents this morning.

Quick facts: Panoramic Resources Ltd

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ASX:PAN
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Market Cap: $205.09 m
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