Losing its lustre

It seems that Asian-based commodity traders are not the only ones in the market for distressed Australian resource assets.

Pacific Roads Resource Funds, the private equity firm of investment banker Paul Espie, is to secure a controlling stake in emerging nickel mining group Albidon, after agreeing to invest up to $US26 million in convertible notes.

The money will be used to provide Albidon with much-needed funds for the development of its Munali project, but the terms crystallise Albidon's dramatic fall from grace in the last eight months.

In May last year, Albidon's shares peaked at more than $5, and gave it a market capitalisation of $700 million, after it was tipped as a potential takeover target of the likes of Xstrata, Zinifex and Norilsk.

But Albidon's share price has since sunk to a recent low of 4.9c, and even after today's announcement it is trading at just 9.2c, and a market cap of $19 million.

Pacific Road will invest in the zero coupon, unlisted convertible notes in several tranches.

The first $US6 million is conditional on Albidon achieving a $US5 million equity raising – presumably through RBC Corporate Finance, which has been advising the company in recent months – as well as a debt refinancing and due diligence. These notes are convertible at 8c a share.

The second tranche of $US10 million, convertible at 16c a share, is dependent on approval from other shareholders, while the third tranche of $US10 million, which would be exercisable at a 10 per cent discount to the prevailing market price, is optional.