Billionaire mining investor Robert Friedland is seeking C$300 million ($305 million) in an initial public offering to pay for an African venture and to allow it to redeem convertible bonds whose interest rates will soon double.
Friedland’s Ivanplats Ltd. plans to sell shares in Toronto and has started meeting with potential investors, according to a person familiar with the sale, who declined to be identified because the details haven’t been published. The sale will help fund copper exploration projects and provide equity for convertible bondholders before rates on the debt jump to almost 19 percent on Nov. 10, according to the IPO prospectus.
The three-year notes were sold last year with an escalating interest rate that soars again to 26 percent in November 2013 unless they’re redeemed for stock, according to the 305-page document.
“It’s a gun to the head,” Geof Marshall, who helps manage $6.3 billion of fixed-income investments at CI Investments Inc. in Toronto, said by telephone on Sept. 21. “The longer they wait, the more the equity holders’ piece of the pie gets smaller and smaller.”
The pressure to sell shares adds to what’s becoming a challenging year for Friedland, 62. In April, he lost control of Mongolian copper miner Turquoise Hill Resources Ltd., a company he founded, to a takeover effort by London-based Rio Tinto Group. Two months later, Friedland -- who has a net worth of at least $1 billion, according to data compiled by Bloomberg -- subscribed for about C$261 million of a Turquoise Hill rights offer to avoid diluting his 14 percent stake.
Friedland, who lives in Singapore, wasn’t immediately available for comment, according to a spokesman, and didn’t respond to e-mails.
Terms of the IPO may be made available to the investors as soon as this week, according to the person familiar with the sale.
Excluding funds set aside specifically for its South African platinum-mining joint venture, Ivanplats has enough cash to last until the end of October, according to the prospectus.
“In the event the offering is not successful, the company would need to raise additional funding, whether by debt or equity,” Ivanplats says in the document.
Friedland was born in Chicago and began investing in mining in the late 1980s. His first multibillion-dollar deal came in the 1990s when, as co-chairman of Diamond Field Resources Inc., the owner of the Voisey’s Bay nickel deposit, Friedland presided over a bidding war between Canadian miners Inco Ltd. and Falconbridge Ltd. Inco paid C$4.3 billion for the project in 1996.
Turquoise Hill signed an option in 2000 to explore in Mongolia. That led to its acquisition of the Oyu Tolgoi project, which is now a $6 billion copper and gold project under construction in the Gobi Desert.
Ivanplats has a stake in the Platreef platinum project in South Africa and copper assets in the Democratic Republic of Congo. It will cost about $2 billion to develop the Kamoa copper project in Congo, according to the prospectus.
While Congo holds a treasure trove of natural-resource wealth, the country is among the world’s riskiest to do business, according to a report last month by Maplecroft, a Bath, England-based risk-analysis company.
“That’s possibly why the escalating rates on these bonds are so high,” said CI’s Marshall, who doesn’t own the bonds. “It’s to compensate for the cyclicality of mining and the geopolitical risk of operating in non-developed geographies.”
Ivanplats has sold $165 million of convertible bonds since Nov. 10. Ivanhoe Mines Ltd., as Turquoise Hill was known before Rio gained control, bought $15 million of the bonds, according to the prospectus.
Ivanplats sold the first $115 million tranche of the bonds in November, the same month it bought a 68 percent interest in the mothballed Kipushi zinc and copper mine in Congo’s Katanga province, according to the prospectus.
Ivanplats still owes money to Israeli businessman Dan Gertler for Kipushi and will pay him as much as $105 million if the IPO raises at least $250 million, according to the document. Ivanplats must still pay $85 million by Dec. 14 even if the share sale doesn’t go ahead as planned.
The IPO would be the third-largest Canadian mining offering since at least 1999, according to data compiled by Bloomberg. Franco-Nevada Corp. raised $1.26 billion in a 2007 offering while Tahoe Resources Inc. sold $365.4 million of stock in 2010.
Bank of Montreal is leading a group of underwriters for the Ivanplats sale including Morgan Stanley, Macquarie Group Ltd. and Royal Bank of Canada, according to the prospectus.