earth mining
Introduction
Denver-Based New Earth Mining, one of the largest US precious metal producers, was enjoying rapid growth in earnings with the continued improvement of its operating margins. New Earth Mining had accumulated a large amount of cash on its balance sheet. It had a simple debt structure and a reasonable leverage ratio with no significant risk of liquidity. With its strong financial condition and the desire to diversify its business though new capital investments rather than acquisition, it felt that was necessary to implement a diversification program. A new investment opportunity appeared in early 2012. New Earth Mining was informed of the existence of a major body of iron ore close to the massive Kalahari manganese field in the Northern Cape of South Africa by an independent exploration consulting company. New Earth felt an investment in iron ore provided a strategic fit for its diversification objective. The price of iron appreciated more than five-fold from 2002 to 2012. Unlike the price of gold, for which there was considerable speculation, the price of iron was not expected to fall dramatically given the strong global demand for the commodity. Due to the demand exceeding supply of iron until at least 2016, New Earth decided to evaluate the feasibility and profitability of developing the Kalahari. New Earth would form a new subsidiary, New Earth South Africa (NESA), to undertake the mining operation. It had tentatively negotiated a financing package with the potential customer and a syndicate of US Banks for its South African venture. Of the $200 million needed to complete the project, $100 million was tentatively negotiated with the overseas buyers. There are three portion of debtholder which are a group of U.S. Banks agreed to provide a syndicated bank loan to NESA worth $60 million in senior secured debt at 10% interest rate, a large Japanese Bank and Export –Import Bank of South Korea agreed to jointly provide $40 million senior unsecured debt at
Denver-Based New Earth Mining, one of the largest US precious metal producers, was enjoying rapid growth in earnings with the continued improvement of its operating margins. New Earth Mining had accumulated a large amount of cash on its balance sheet. It had a simple debt structure and a reasonable leverage ratio with no significant risk of liquidity. With its strong financial condition and the desire to diversify its business though new capital investments rather than acquisition, it felt that was necessary to implement a diversification program. A new investment opportunity appeared in early 2012. New Earth Mining was informed of the existence of a major body of iron ore close to the massive Kalahari manganese field in the Northern Cape of South Africa by an independent exploration consulting company. New Earth felt an investment in iron ore provided a strategic fit for its diversification objective. The price of iron appreciated more than five-fold from 2002 to 2012. Unlike the price of gold, for which there was considerable speculation, the price of iron was not expected to fall dramatically given the strong global demand for the commodity. Due to the demand exceeding supply of iron until at least 2016, New Earth decided to evaluate the feasibility and profitability of developing the Kalahari. New Earth would form a new subsidiary, New Earth South Africa (NESA), to undertake the mining operation. It had tentatively negotiated a financing package with the potential customer and a syndicate of US Banks for its South African venture. Of the $200 million needed to complete the project, $100 million was tentatively negotiated with the overseas buyers. There are three portion of debtholder which are a group of U.S. Banks agreed to provide a syndicated bank loan to NESA worth $60 million in senior secured debt at 10% interest rate, a large Japanese Bank and Export –Import Bank of South Korea agreed to jointly provide $40 million senior unsecured debt at