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Zinc Mining Giant Strategizes Debt Repayment and Secures Future Growth


Lauren Miller

May 13, 2024 - 19:52 pm


Zinc Miner Volcan to Undertake Debt Payments and Pursue Refinancing Without Financial Losses

(Bloomberg) – Amidst a backdrop of speculation, Volcan Cia Minera SAA has charted out a firm financial course to settle its obligations straightforwardly. The chief of Integra Capital, now the majority stakeholder, has been resolute in dismissing any notions of defaults or restructuring looming over the prolific Peruvian zinc miner.

Volcan's Commitment to Meeting Obligations

In a determined statement made to Bloomberg, Jose Luis Manzano, who stands at the helm of Integra Capital, affirms a clear strategy for Volcan Cia Minera SAA. His company's focus will be on fulfilling debt payments scheduled through August, followed by a steadfast plan to refinance succeeding liabilities. Manzano is swift in clarifying the company's position against counterproductive measures, "Absolutely, categorically no haircut is necessary. It’s just changing the maturities and that's it. The future cash flow doesn’t justify a haircut.”

Striding forward, Volcan remains committed to its financial plan. This not only includes payments in June and August but also proactive moves to divest non-core assets. Manzano has provided insights into the advanced negotiations surrounding the sale of ancillary operations, which encompass hydroelectric and cement facilities. This strategic move will serve to strengthen the miner's financial base.

In a recent turn of events, Volcan maneuvered a deferral in a payment tied to its $400 million syndicated loan to June 24, following an accord with banks. Additionally, the company stands before a $7.9 million bond coupon maturing on Aug. 11. These critical financial data are derived from records compiled by Bloomberg.

Engaged with its bondholders, Volcan is in the process of securing legal and debt advisors for the purpose of refinancing the notes. This action came on the heels of the revelation that Integra had taken a controlling interest in the company last week, which initially led to Volcan's debt falling to 61.5 cents on the dollar. However, it is noteworthy that the price has since recovered to 65.2 cents as per Trace data. This recovery reflects the company's current valuation of $410 million on the Lima stock exchange.

Integra Capital's Acquisition and Financial Strategy

Integra Capital's Jose Luis Manzano, an Argentine with a portfolio comprising various sectors including media, energy, and mining, commemorated his entry into Peru with the agreement to acquire a 55% stake in Volcan from Glencore PLC last week for a sum of $20 million. Reinforcing this investment, Glencore has pledged up to $40 million in financing to aid Volcan in resolving outstanding debts.

The transaction between Volcan and Integra marks a continuation of a relationship, seeing as Integra previously acquired a mining asset from Glencore in northern Argentina. Manzano holds an optimistic viewpoint, fueled by the potential expansion of copper mining at Volcan – including the possibility of forming a joint venture with Antofagasta Plc. The ambition doesn't end there; zinc and gold mining at the Volcan mines also figure prominently in Manzano’s vision for the future.

"I think the market was overestimating the financial risk and underestimating the geological potential," remarked Manzano. With this perspective, Manzano is steering Volcan towards a future that rests on realizing the full capabilities and opportunities lying within their mining concessions.

The involvement of Manzano and Integra is a breath of fresh air for Volcan, pivoting the company's strategy towards solid ground and away from the troubled waters of financial duress. Manzano’s experience in managing a diversified holding adds a layer of strategic sophistication to the company's future maneuvers.

A zinc and lead refinery in La Oroya, Peru.

The Path Forward for Volcan

The path laid out by Volcan and Integra is one that balances immediate financial commitments with a more sustainable approach to asset management and revenue streams. With the payment horizon extending into August and beyond, the focus is now on strategic negotiations and financial instruments that will transpose Volcan's assets into effective leverage for their financial obligations.

For investors and market onlookers, the recent volatility in Volcan's bond values serves as a palpable reminder of the delicate dance between market perceptions and the intrinsic value of a company's assets. The temporary dip followed by a steady resurgence in bond prices underscores the impact of strategic corporate movements on investor confidence.

In forging a new alliance with Antofagasta Plc and potentially integrating copper into the asset repertoire, Volcan could tap into a lucrative metal market, which has seen rising demand parallel to the global electric vehicle boom and infrastructure innovation. The emphasis on copper, along with zinc and gold, paints a diversified and versatile picture of Volcan's mining endeavors.

The business acumen and insight that Integra, under the guidance of Manzano, brings to the table could be the catalyst facilitating not just Volcan’s financial stability but also a broader regional influence in the mining sector. This influence could forge new partnerships, broaden economic prospects, and ultimately contribute to Peru's standing as a mining heavyweight.

The discussion surrounding Volcan's future is laced with intricacies and considerations that span beyond the immediate price ticks of stocks and bonds. It dwells on the more profound narratives of sectoral confidence, sustainable practices, and the valorization of natural resources within the Peruvian context.

Glencore's Strategic Role in the Transaction

The Glencore angle in this multifaceted transaction brings to light the strategic shifts that are coming into play within the mining sector. As a previous controlling entity of Volcan, Glencore's decision to pass the baton to Integra Capital comes with a support package designed to bolster Volcan's position vis-a-vis its financial obligations.

Furthermore, the financial support of up to $40 million extended by Glencore is a testament to their continued belief in Volcan's value proposition. It acts as a safety net, ensuring that Volcan can navigate its short-term financial tightrope without risking the core operations that form the bedrock of its mineral production.

The synergy between Glencore, Integra, and Antofagasta Plc could usher in an era of cooperative ventures where shared expertise and capital are the keystones of mutually beneficial outcomes. The potential joint venture at the Volcan mines demonstrates a shift towards partnership-based strategies within the broader industry framework.

Conclusion: Positioning for Prosperity

Volcan's trajectory, now under the guidance of Integra Capital and with support from Glencore, is an intriguing interplay of strategy, finance, and mining potential. The company is gearing itself towards a future where it not only meets its immediate financial deadlines but also establishes a robust foundation for resource exploration and market growth.

With assistance from Maria Elena Vizcaino and the resources of Bloomberg L.P., the unfolding story of Volcan's strategies and the roles of its stakeholders provide an intricate view into the complexities and dynamism of the global mining industry.

As the world continues to evolve with its ever-increasing demands for resources, entities like Volcan and their strategic maneuvers within the sector will remain crucial to understanding how industry leaders adapt and flourish in a competitive and resource-intensive global economy.

©2024 Bloomberg L.P.

This news article is brought to you by Bloomberg and incorporates the direct insights from Jose Luis Manzano, delineating a clear path for Volcan Cia Minera. For further information, visit Bloomberg's website.