UPDATE 2-Australia's Alumina to raise $300 mln in convertibles

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By Cecile Lefort

SYDNEY, May 13 (Reuters) - Australia's Alumina Ltd (AWC.AX: Quote, Profile, Research, Stock Buzz) said on Tuesday it launched an offer to raise about $300 million in convertible bonds to repay debt, help fund the expansion of an alumina refinery and dig a new bauxite mine.

Convertible bonds are especially suited to the investment intensive resource sector where companies need to raise funds to complete major projects.

Shares in Alumina, a 40 percent partner in the Alcoa World Alumina and Chemicals (AWAC) joint venture that is 60 percent owned by Alcoa (AA.N: Quote, Profile, Research, Stock Buzz), were placed on a trading halt on Tuesday. The stock closed at A$6.42 on Monday.

AWAC, in partnership with BHP Billiton Ltd/Plc(BHP.AX: Quote, Profile, Research, Stock Buzz)(BLT.L: Quote, Profile, Research, Stock Buzz) and Rio Tinto Ltd/Plc (RIO.AX: Quote, Profile, Research, Stock Buzz)(RIO.L: Quote, Profile, Research, Stock Buzz), is expanding the Alumar alumina refinery in Brazil by 2.1 million tonnes. AWAC holds 54 percent of the project.

It is also developing its wholly-owned Juruti bauxite mine, also in Brazil, which will initially yield 2.6 million tonnes of the alumina-making raw material. Both projects are set to start up in the first half of calendar 2009, a company spokesman said.

Convertible bonds stand between debt and equity, allowing companies to avoid issuing more stock at a time when their share price is expected to increase. The bonds give investors regular interest payments and allow them to benefit from a share price appreciation when the securities convert into equity.

Alumina's notes are expected to pay a coupon between 1.7 and 2.7 percent per year and offer a 25-33 percent conversion premium to the A$6.42 reference price, according to a term sheet seen by Reuters.  Continued...