Bulong
In April 2002 Preston Resources submitted a restructuring plan for the secured debt of its main subsidiary
“Bulong Operations Pty. Ltd. (BOP)”. The debt mainly consisted of $185 million in senior secured notes,
Working capital loans and hedging contracts owed to Barclays. To avoid a liquidation of BOP, the plan had to be approved by the Supreme Court of Western Australian, the majority of the noteholders and the Preston shareholders. The Bulong Nickel Project
The Nickel and Cobalt Industries
The Nickel market is estimated to be 1 million tons, growing at 3,6% per year. The Cobalt market is estimated to be 36.000 tons per year. Nickel and Cobalt prices are a highly volatile. Nickel prices show a downward trend.
The Bulong Nickel Project
The project was born in out of the discovery of high nickel reserves in West Australia in 1970. Despite high processing risks, a mining consulting firm judged the project positively.
Bulong mine
In 1998 Preston agreed to buy the Bulong mine which left Resolute with a strong balance sheet. Resolute agreed to provide interest‐free, subordinated loans to Preston to cover WC needs and cost overruns. Preston stock price fell 12% on day of announcement. The deal made Preston the world’s sixth‐largest nickel producer.
Bulongs average cash production cost where USD 1.04 per pound over first 5 years vs. $2.10 for major competitors. Financing
Preston funded $319m of the acquisition price with A$260m bridge loan, A$39.9m new equity and A$11.1m in liabilities and A$7.5m in cash on a deferred basis. Barclays became the counterparty for Bulong’s foreign FX contracts. In addition to assuming the FX liabilities Preston contributed A$30m of new equity (20m from
Resolute), which made Resolute Preston’s largest shareholder with 19.9% ownership.
Bulong was projected to have an unleveraged after‐tax rate of return of 18% assuming average annual nickel and cobalt process of USD 3.25 and USD 15 per pound and an average FX rate of
“Bulong Operations Pty. Ltd. (BOP)”. The debt mainly consisted of $185 million in senior secured notes,
Working capital loans and hedging contracts owed to Barclays. To avoid a liquidation of BOP, the plan had to be approved by the Supreme Court of Western Australian, the majority of the noteholders and the Preston shareholders. The Bulong Nickel Project
The Nickel and Cobalt Industries
The Nickel market is estimated to be 1 million tons, growing at 3,6% per year. The Cobalt market is estimated to be 36.000 tons per year. Nickel and Cobalt prices are a highly volatile. Nickel prices show a downward trend.
The Bulong Nickel Project
The project was born in out of the discovery of high nickel reserves in West Australia in 1970. Despite high processing risks, a mining consulting firm judged the project positively.
Bulong mine
In 1998 Preston agreed to buy the Bulong mine which left Resolute with a strong balance sheet. Resolute agreed to provide interest‐free, subordinated loans to Preston to cover WC needs and cost overruns. Preston stock price fell 12% on day of announcement. The deal made Preston the world’s sixth‐largest nickel producer.
Bulongs average cash production cost where USD 1.04 per pound over first 5 years vs. $2.10 for major competitors. Financing
Preston funded $319m of the acquisition price with A$260m bridge loan, A$39.9m new equity and A$11.1m in liabilities and A$7.5m in cash on a deferred basis. Barclays became the counterparty for Bulong’s foreign FX contracts. In addition to assuming the FX liabilities Preston contributed A$30m of new equity (20m from
Resolute), which made Resolute Preston’s largest shareholder with 19.9% ownership.
Bulong was projected to have an unleveraged after‐tax rate of return of 18% assuming average annual nickel and cobalt process of USD 3.25 and USD 15 per pound and an average FX rate of