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Sunday, 19 November 2017

BONDS: Carmen Copper puts finishing touch to private equity win

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The planned US dollar five-year Reg S bond from the Philippines’ Carmen Copper represents the monetisation of parent Atlas Mining’s investment in the mining company, with last June Atlas acquiring a 45.54% in Carmen from private equity investor Crescent Asia Special Opportunities Portfolio (Casop) BDO Capital and Credit Suisse are the leads on the deal, which is likely to emerge in the next few days.

Casop invested US$85m in the open-cast mine in Toledo City outside Cebu in the Southern Philippines in 2006. The stake was taken out last year for US$368m, representing an astonishing return of more than 300% on the 45.54% equity interest in Carmen.

In order to ramp up production at the mine, which was running at 2000 tonnes per day in 2006, Casop secured a US$140m amortising loan from BDO, with the Philippines bank, looking to take out the remainder of that loan via the bond issue. Some US$25m of a US$75m inter-company loan guaranteed by Carmen will be taken out and the remainder of the funds used for capex.

After yesterday’s blowout success of Indonesia’s Berau Coal, a bond from another Asian mining company will continue the resource theme neatly and tick the box of rare Philippines corporate issuance. The kind of equity returns Casop has achieved demonstrates just how powerful the surge in global commodity prices has been over the last five-odd years – thanks to China’s rampant demand for the entire commodities complex. Investors in debt clearly get the message that commodity issuance is a sexy proposition.

Still, the Atlas investment in Carmen may not achieve the rampant returns Casop made. While there are 80m tonnes to strip from the Carmen pit and production is running at 40,000 tonnes per day, there were rumours of a cave-in at the pit last week. A person familiar with the mine said that the operator faced a “big task” in addressing the land subsidence.

Carmen Copper CEO George Bujtor denied the cave-in rumours and said that the 40,000 tonnes per day production rate had not been disruption. Atlas plans to double production at Carmen, with the proceeds of the bond after the takeout of the BDO loan to be used for capex to achieve this end.

A bond in the US$400m ballpark is in the works after the company did a roadshow last week in Asia and Europe.

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