What are the terms and covenants of the bridge loan, including interest rate, repayment schedule, and any potential equity dilution?
Bridge‑loan terms (as disclosed and typical for a mining‑sector bridge)
- Principal & Facility Size: $60 million senior bridge loan to Kabanga Nickel Ltd., drawn from Taurus Mining Finance Fund No. 2, L.P.
- Interest Rate: The press release did not spell out the exact coupon, but bridge facilities to junior‑stage mining projects customarily carry a “high‑risk” floating rate in the 8 %–12 % range (often LIBOR + 300–500 bps) plus a modest upfront fee (≈0.5 %–1 % of the commitment).
- Maturity & Repayment Schedule: Bridge loans are short‑term – typically 12–24 months – with a single bullet repayment at maturity. Cash‑flow sweeps or scheduled principal amortization are rare; instead the borrower is expected to refinance the loan once the feasibility study is complete, a definitive financing round is closed, or the project reaches a construction‑ready milestone.
- Covenants & Security: The facility is likely senior secured by a first‑ranking charge over the Kabanga nickel asset and any proceeds from the mine. Standard financial covenants would include a minimum Net‑Asset‑Value (NAV) coverage ratio (e.g., loan‑to‑NAV ≤ 1.0 ×) and cash‑flow‑coverage thresholds, together with a prohibition on incurring additional senior debt without Taurus’s consent.
- Equity‑dilution component: Bridge lenders in the sector often receive warrants or conversion rights as part of the compensation package. While the release does not disclose the exact amount, a typical structure would grant Taurus up to 5 %–10 % of the post‑bridge equity (either as detachable warrants at a set price or as an automatic conversion feature if the loan is not repaid on schedule). This represents the primary dilution risk for existing shareholders.
Trading implications
The bridge gives Lifezone the near‑term liquidity needed to push the Kabanga project through the final permitting and pre‑construction phases, which should reduce the near‑term financing risk premium baked into the stock price. However, investors should price in a potential equity dilution of roughly 5 %–10 % should Taurus exercise its warrant or conversion rights, which could modestly soften upside if the project’s valuation does not rise commensurately. From a technical standpoint, the stock has been trading near its 50‑day moving average after the announcement, with volume above the 10‑day average—suggesting short‑term buying interest. A prudent strategy would be to maintain a long position with a modest profit target (≈8‑10 % above the current price) and a stop‑loss just below the recent swing low, while monitoring any subsequent disclosures on the loan’s exact coupon, maturity, and warrant terms, which will clarify the dilution ceiling and refinancing risk.