BCI Details
 
BC Iron Limited (ASX: BCI) recently came up with the Prospectus and personalised Entitlement and Acceptance Form for its renounceable entitlement offer of October 13, 2016. The forms have been reported to be successfully despatched to Eligible Shareholders.
 
Offer Details: Under the entitlement offer, existing eligible shareholders can apply to acquire 1 new BC Iron share for every 1 existing share held as at October 21, 2016 at an offer price of $0.13 per new share. The offer is particularly for maximum of about 196,263,455 shares at an issue price of $0.13 per share on the basis of 1 share for every share held on the record date with an intent to raise up to $25.5 million before expenses. The offer price has been said to be a 37.2% discount to the volume weighted average price of shares as traded on ASX on the 30 business days prior to the group entering into a trading halt ahead of the offer announcement. The shareholders who do not wish to participate in the offer have also been given the option of selling part or all of their entitlement as the offer is also a renounceable one. The offer closes on November 11, 2016 as of now. Patersons Securities Limited and Foster Stockbroking Pty Ltd have partially underwritten the offer to a total of $20.66 million. Further, Wroxby Pty Ltd has committed to take up its entitlement up to $4.86 million and has also sub-underwritten the offer to $11 million.
 

Dates to consider (Source: Company Reports)
 
Use of Funds: Over the next 12-36 months, BCI intends to use the funds raised from the entitlement offer towards strategies to develop a more robust development case for the overall Buckland mining and infrastructure project while positioning Cape Preston East as an attractive new port (about $3 million). Further, the group aims to explore new opportunities (iron ore and non-iron ore) and build on them for near term earnings (about $11.3 million). Moreover, the proceeds are expected to help the group strengthen its balance sheet and create a buffer against adverse market conditions (about $10 million). It is worth noting that this offer came post BC Iron’s move of selling its 75 per cent stake in Nullagine mine to joint venture partner Fortescue Metals to avoid care and maintenance costs.
 
Risks Involved: Shareholders have been warned of dilution of respective holdings if the shareholders do not participate in the offer. Then failure to meet terms and conditions of the underwriting agreement may become a hurdle for the group. Moreover, consideration is to be given to risks related to commodity price volatility and operating and development risks. The group has suffered impacts from fall in iron ore prices lately but as there seem to be a recovery in commodity prices, the group has received some respite. The existing proposition has to be taken into account at the back of commodity prices although the group aims to focus on new opportunities in iron ore and non-iron ore segments. BCI stock is trading at $0.155 (as at October 28, 2016), and accordingly, the offer price of $0.13 per share is at a discount. Eligible shareholders can consider the offer keeping the above risks in mind.

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