Perth, Oct 31, 2018 AEST (ABN Newswire) - Graphex Mining (
ASX:GPX) has announced an US$80 million funding solution for the development of its Chilalo graphite project in Tanzania, which will see the company fully funded to first production. Highlights of the announcement include the following.
- Castlelake L.P. agrees to provide up to US$80 million of funding for the Chilalo graphite project.
- US$5 million to be raised immediately from the issue of interim loan notes.
- The binding term sheet for the development funding package includes up to:
o US$40 million of senior secured loan notes, and
o US$40 million of equity.
- This transaction sees Graphex fully funded to production, subject to the satisfaction of certain conditions, including full form documentation and resolution of issues associated with Tanzanian mining legislation.
- The funding package follows an updated pre-feasibility study (PFS) released during September:
o post-tax NPV (10% discount rate) - US$349 million;
o post-tax internal rate of return (IRR) - 131%;
o post-tax payback period - 0.84 years, and
o pre-production capital expenditure of approximately US$43.6 million for Stage 1 (including contingencies).
Analyst comment: funding is arguably the largest risk for any resource development company and, given the changes to Tanzania's legal framework for resource projects last year, the task has become more difficult for entities operating in that country.
Being in receipt of a fully funded solution from a highly reputable Western financier (the first, we understand, in Tanzania since the updated legislation) is a game-changer for Graphex and puts it ahead of other graphite developers, in that region in particular.
The transaction was achieved as a result of the Chilalo project's exceptional returns, as highlighted in the recently updated PFS, the most notable feature of which was the exceptional operating margins (PFS - $1,298/t). These were due to the quality of the product produced (expandability, flake size and mass distribution), leading to a forecast basket price (PFS - US$1,777) at the upper end of the spectrum for global graphite projects.
Castlelake LP: is global private investment firm that manages private funds of around US$14 billion in assets. The group has been the major backer for three development projects listed on the ASX in the past 15 months, at a total development cost of around $400 million.
We understand, however, that this is the first time Castlelake has provided a fully funded, turnkey solution for a single resource development project (for an ASX-listed company at least). Graphex will also become Castlelake's largest equity position (percentage ownership) in an ASX-listed company, as the group seeks a minimum 40% interest in Graphex after the development financing. It is a clear indication of Castlelake's long- term faith in the Chilalo project and Graphex's share price potential.
Valuation: following the funding announcement and PFS update, we have updated our valuation of Graphex to $1.51/share (share price $0.27). For full details of our valuation analysis, watch the video.
To view the video, please visit:
http://www.abnnewswire.net/press/en/95273/gpx
About Graphex Mining Ltd
Graphex Mining Limited (ASX:GPX) is an Australian resources company listed on the Australian Securities Exchange under stock code GPX. Graphex owns the world-class, coarse flake Chilalo Graphite Project, located in south-east Tanzania, which is an outstanding development ready opportunity.
About The Sophisticated Investor
The Sophisticated Investor is a new equity investment tool which seeks to assist investors in becoming more informed in their investment decision making. We show and tell investors about a company in a series of short, informative videos. We possess specialist equity analyst skills and are complemented by video professionals. We conduct site visits and interview management, in a way most investors simply aren’t able to access. We promote long term value creation for investors by employing detailed financial analysis and intrinsic value calculations.
Customer notice
Adam Kiley trading as The Sophisticated Investor ('TSI'), (AR No. 458224), is an authorised representative of Intelligent Financial Markets Pty Ltd (AFSL No. 426359). The information contained in this communication is intended as general advice only. Your personal objectives, financial situation and needs have not been taken into consideration. Accordingly, you should consider how appropriate the advice is (or is not) to your objectives, financial situation and needs before acting on the advice. The information in this communication should not be the only trigger for your investment decision. We strongly recommend you seek professional financial advice whenever making financial investment decisions.
Conflict of interest
TSI does and seeks to do business with companies featured in its articles and videos. As a result, investors should be aware that TSI may have a conflict of interest that could affect the objectivity of some articles or videos. Investors should consider TSI articles and videos as only a single factor in making any investment decision. The publishers also wish to disclose that they may hold stock in some companies featured in their articles and videos, and that any decision you make to purchase the stock of a company TSI profiles should be made only after you have initiated your own enquiries as to the validity of any information contained in those articles and videos.
Publisher's note
TSI will only initiate coverage of a company that passes our internal investment checklist. Once a company has passed this checklist, we will initiate coverage of that company and follow up with ongoing updates and commentary on its activities. Articles and videos produced and published by TSI are NOT Research Reports in terms of ASIC Regulatory Guide 79.
| ||
|
