State-owned mining company NMDC Limited may spend nearly AUD 12.1 million to subscribe a rights issue planned by its Australian arm Legacy Iron Ore Limited.
According to a filing with Australian Securities exchange (ASX), Legacy said it plans to raise AUD 25 million by way of rights issue and the Indian miner, as majority shareholder, is expected to acquire shares under the 'entitlement offer' equivalent to its 48.8 per cent stake.
"Legacy Iron's major shareholder NMDC (48.8 per cent) has confirmed its commitment to take up its full entitlement under the entitlement offer which will raise a minimum amount of approximately $12.1 million. NMDC's participation under the entitlement offer is subject to approval from the Foreign Investment Review Board (FIRB). NMDC has lodged an application for approval with FIRB," Legacy informed ASX.
The Australian mineral and metals explorer told the ASX that 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Though Legacy Iron planned the rights issue last year, the same was withdrawn citing poor market conditions.
"Proceeds from the entitlement offer will be applied towards the ongoing development of the Mt Bevan iron ore project, repayment of AUD three million Citibank loan facility and further exploration and development work across Legacy Iron's iron ore and other assets," the Australian miner said.
Mt Bevan is a joint venture between Legacy and Hawthorn Resources Limited in which Legacy will get a 60 per cent interest in the project by expending a minimum of AUD 3.5 million to develop the project to pre-feasibility status.
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, according to Legacy.
NMDC acquired 48.8% state in Legacy Iron in 2011. It is the first overseas acquisition done by the Indian miner.