Shares in AIM-listed tantalum concentrate supplier Noventa plunged on Monday after it said it would be forced to sell its HAMC Minerals business and initiate a redundancy programme that would affect around 50 per cent of staff within its operating companies.
The group said it expects that all action in relation to the redundancy programme, which will affect around 145 people, will be completed in the second half of April.
The move is part of a wider programme to reduce the cost base of its operating companies after Noventa's subsidiary HAMC Minerals defaulted on its secured loan facility. Since the default Noventa and the providers of the loan, Richmond Partners Master, held a number of discussions which have now concluded, although no viable solution could be found that would enable HAMCM to stay within the terms of the loan, or for those terms to be relaxed.
As such, on March 15th Richmond Partners served notice on HAMC Minerals for the immediate repayment of the outstanding amounts under the loan, which amount to approximately $55.3m, including default penalties, while also enforcing the security interests available to it.
Consequently, HAMC Minerals and its subsidiaries are to be put up for sale and Noventa will no longer mine and process tantalum pentoxide concentrate.
The sale is expected to take up to 30 days.
Under the settlement agreement, three board members, namely Luca Bechis, Fernando Fernandez-Torres and Jose Luis de Barros, will resign without any further payments due to them.
Furthermore, the company said it intends to become an investing company on AIM, subject to the approval of shareholders at an extraordinary general meeting.
Trading continues to be tough
The group admitted its production of tantalum pentoxide concentrate has continued to remain at low levels from the new processing plant at Marropino, also known as the New Plant, and said this was the reason behind the company defaulting on the loan.
In a statement the company said: "The boards of directors of the operating companies, working with Richmond, are undertaking various actions to revise the future strategy of the operating companies within the group (all of which are subject to security interests over their ordinary shares
under the SLF).
"These actions are focussed on reducing the current cash burn of these operating companies by suspending production from the New Plant and focussing on achieving a lower, but more predictable and sustainable, level of production from the old processing plant at Marropino (the Old Plant)."
These changes in the strategy of the operating companies includes a detailed review of all operating expenditure which has not yet been committed in order to suspend expenditure which is not directly related to production from the Old Plant and is not health and safety related.
In addition, the company plans to review and reduce the general and administration costs in all operating subsidiaries, review all contracted support expenditure at Marropino, and avoid any further investment in the completion of the New Plant, other than for exisiting contracted work and outstanding payments due.
Furthermore, the company will suspend the supply of tantalum pentoxide concentrate from Highland African Mining Company to the group sales and distribution company, Speciality Minerals Corporation, following the default.
The group added: "While these are difficult actions to be taken, the boards of the operating companies, working with Richmond, hope that the cash burn in Marropino can be significantly reduced and the operations can be brought to a break-even level. The results of these actions will not now be of benefit to Noventa for the reasons outlined in the section of this announcement entitled 'Noventa'."
Noventa raises funds through draw down
The group announced that it has raised £434,000 after expenses via a draw down on its equity financing facility with Darwin Strategic, a majority owned subsidiary of Henderson Global Investors Volantis Capital. The funds will be used for general working capital purposes. Under the agreement the group issued 38m new ordinary shares, which will be issued at a price of 1.2518p per share.
The share price plunged 35.56% to 0.72p by 14:00.