The Sandfire Resources Ltd (ASX: SFR) share price is drifting in the red during morning trading, currently changing hands at $5.40.
Sandfire shares are on the move this morning after the company announced a key divestment of its holding in Adriatic Metals PLC (ASX: ADT).
Here's what we know.
What was announced?
Sandfire advised it had appointed an investment banking syndicate to sell its stake in Adriatic Metals. The syndicate comprises Canaccord Genuity Group Inc, RBC Europe Ltd, and Stifel Nicolaus Europe Limited.
Specifically, it has appointed the bookrunners to arrange a secondary placement of "up to 34,600,780 CHESS depositary interests representing ordinary shares" in Adriatic.
This represents Sandfire's entire holding in the company and signifies around 16% of Adriatic's existing float.
The secondary placement offer will be at a price of $2.80 per share. This represents an approximate 16% discount on the company's closing price on Tuesday.
Proceeds from the divestment will gross Sandfire a hefty sum of around $97 million. It will sell the shares to institutional investors on the investment banking syndicate's pitchbook.
Regarding the particulars of what sellers may or may not do in the situation, Sandfire said:
In the event that the Seller determines to sell less than all of its shares in the Secondary Placing, the Seller has agreed that it will not, for a period of 90 days following the completion of the Secondary Placing, offer, sell or otherwise transfer any shares from their remaining shareholdings in the Company without the consent of Canaccord, RBC and Stifel.
Sandfire expects the bookbuild to close no later than 2pm (AEST) on 13 October, unless otherwise stipulated.
What does this mean for Sandfire's share price?
The divestment follows an announcement 2 weeks ago from Sandfire. Then it announced it intended to raise around $322 million from an underwritten retail entitlement offer.
That offer was conducted at $5.40 per share. This was part of a $1.25 billion round that the company intended to help finance the purchase of the Minas De Aguas Teñidas (MATSA). The MATSA mining complex is located in Spain.
Sandfire purchased a US$1.86 billion stake. It financed the deal with a combination of equity capital, its own cash, and an existing debt facility of $897 million.
Sandfire's divestment away from Adriatic will fortify the company's balance sheet. The cash injection will equate to just under $100 million.
With this in mind, the net effect the sale will have directly on Sandfire Resources' share price is not yet clear.
For reference, Adriatic Metals finished yesterday 4% higher at $3.33, and is up 43% this year to date.
Sandfire Resources share price snapshot
The Sandfire Resources share price has struggled this year to date, posting a return of 8% since 1 January. However, it has climbed 32.5% in the past 12 months, and rallied 4% this past week.
This comes in ahead of the S&P/ASX 200 Index's (ASX: XJO) return of about 20% in the last 12 months.
