Standard Bank Group does USD15m convertible debenture transaction with Pacific Iron
24 October 2011

Standard Bank Group, in partnership with Pareto Commodities LLC (Houston), is pleased to announce the closing of a USD15-million convertible debenture financing with Pacific Iron, as part of a larger USD44.3-million financing. The debentures are convertible into 15-million common shares of Standard Bank Group's election or upon an initial public offering of Pacific Iron and have a tenor of up to three years. This currently represents approximately a 14.38% equity interest on a fully diluted basis. 

Pacific Iron has been promoted by Blue Pacific Assets Corp, Colombia's premier natural resources developer. 

The company is a vertically integrated pig iron producer which will commence production from a plant close to the Colombian capital of Bogota during the first half of 2012, at an initial rate of 120,000 tonnes per annum. The plant will use blast furnace technology supplied by a newly created Joint Venture between Standard Bank Group and Modulax Industria e Comercio Ltda. Production capacity will be expanded in an incremental fashion, targeting production in excess of one million tonnes per annum by 2017. Pacific Iron has secured several iron ore concessions throughout Colombia and expects to be ultimately self sufficient in iron ore supply. 

Proceedes from the financing will be applied to plant refurbishment and construction, and towards the development of Pacific Iron's mining concessions. 

About the transaction, Luis Guillermo Parra, CEO of Pacific Iron, said: "We are very enthusiastic about this new partnership which we believe is going to open up a spectrum of new opportunities for both parties and more importantly for Colombia. The confidence placed by Standard Bank in this exciting industrial and natural resource opportunity, ratifies once more our value proposition built upon the combination of several key factors, such as the possibility of generating significant economies of scale and have a low cost quartile for production scheme, rely on a strong and experienced sponsorship and management team, and receiving the support from government allowing us to generate value for all stakeholders. We are very pleased to have Standard Bank as one of our main investors." 

Michael Jakubik, Global Head of Structured Commodity Solutions at Standard Bank Group, commented: "Standard Bank Group is very excited about its partnership with Pacific Iron and Blue Pacific to develop this compelling natural resource opportunity in Colombia. Investing in companies such as Pacific Iron demonstrates the Bank's ability to commit capital at all stages of a project's development and to combine the Bank's mining finance and physical commodities trading expertise to provide clients with investment products which satisfy their unique requirements." 

Rolando Hermoso, Managing Partner of Pareto Commodities LLC, said: "This investment will benefit from its access to high quality iron ore and metallurgical coal resources located in close proximity to the plant. Colombia is the world's low cost producer of high grade metallurgical coal. This resource and developed transport links will make Pacific Iron a very efficient producer." 

About Pareto Commodities LLC
Pareto Commodities LLC is a boutique merchant bank advisory firm based in Houston. The firm provides advisory services to commodity-linked businesses in the Americas. Pareto's principals have extensive experience in all phases of commodity-linked finance and risk management. 

This expertise includes:

  • Minerals, metals and mining, agriculture, oil, gas, refined products and chemicals, and logistics.
  • Principal Investments, with a focus on special situations in challenging markets.
  • Commodity Trading and risk management, with an emphasis on using traded instruments to manage the risks inherent in physical commodity markets.
  • Structured finance transactions that lever the full array of capital markets solutions to afford flexibility and risk reduction to commodity-linked businesses.

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