Commonwealth Bank gives Zircon a much-needed debt extension

2009-01-07

Jan. 5, 2009 MINERAL sands explorer and producer Australian Zircon has received extensions on its debt repayment from the Commonwealth Bank of Australia. Under the agreement with the bank, CBA will have priority over shareholders and other creditors. The deal with CBA comes as Australian Zircon attempts to survive by agreeing to a $40 million debt-for-equity swap with Austrian commodity trading giant DCM DECOmetal, signed in November. CBA agreed to extend the repayment date of Adelaide-based Australian Zircon's $5 million temporary overdraft facility to June 30, from December 30. Australian Zircon will also begin repaying $47 million advanced by CBA from September 30, and make earlier repayments from June 30, if the miner's cash flow is higher than that set out in the term sheet agreed with the bank. The miner will pay CBA all of its US dollar revenue for foreign exchange hedging contracts made with the bank. Australian Zircon will cover any foreign exchange liability over $10 million, or pay the bank a risk fee. Australian Zircon will start final testing on its Mindarie zircon and titanium mine before May 1, and will finish no later than August 31. The miner also will not make repayments on its convertible notes, or pay any dividends, without the consent of CBA. The company could pay dividends once the debt to CBA falls below $42 million. Australian Zircon's agreement with DCM, which will give the Austrian company a 69 per cent interest in the miner, is still conditional on government and shareholder approval. Shares in Australian Zircon closed down .002c at 4c on Friday.