worth a punt?
Avenira Ltd (AEV.ASX)
Financing executed. Focus now on achieving first production.
x Avenira (AEV) executes JV and placement agreements with Mimran raising a
total of $28.1 million.
x AEV last week executed binding documentation for its JV with and placement to Mimran, which it first announced in November 2015. The execution was undertaken as per the initial terms, a positive considering the volatility in equity markets since then.
x To recap, AEV will 1) Place 104.8M AEV shares at $0.117/share for $12.3M, and
2) Sell 20% of the Baobab project for $15.8M at a look-through valuation of $79M (100%). The Mimran affiliates Tablo Corporation and Mimran Natural Resources subscribe for the placement and invest in Baobab respectively. Financial close of the transactions is expected in the next few weeks.
x Sovereign risk minimised. The partnership with Mimran significantly minimises the issues pertaining to sovereign risk. AEV now has a 20% Senegal-based project partner in Baobab which is required for the large mine permit.
x The $28.1M in funds received will bring AEVs cash balance to $40M and provides funding surplus to the capex and working capital required to achieve production. Together with its December year end cash balance of $12M, the $28M from Mimran increases AEVs consolidated cash to $40M. This is more than ample to bring in Baobab SMP into production. We estimate pre- production capex and working capital required for the project to be $27M.
x Site works commenced. A mining contractor was appointed December and site works commenced mid-January. A contract for handling and shiploading has been signed with Port of Dakar operator TVS-Necotrans. The first water bore has been drilled and the wet screen order placed.
x Production is targeted second-half 2016. AEV is aiming for commercial production from the SMP to commence in second half 2016, which will ramp up to 0.5Mtpa product. AEV also expects first revenues in the second half as well.
x Offtake MoUs with six parties more than covers planned output. AEV has signed non-binding MoUs with six parties concerning offtake for quantities with each ranging from 50kt to 240kt. The combined total of all MOUs is almost double the initial annual planned production target from the SMP of 500kt.
Earnings and Valuation:
x As we had already factored the execution of the Mimran transactions in forecasts pro-forma, we have made no changes to earnings projections. Our risked valuation of AEV increases to $0.25/share from $0.23/share, due to execution of the agreement.
x We maintain our Spec Buy recommendation and increase our 12-month price target to $0.25/share, based on our valuation (previously $0.23/share).
x Shareprice catalysts include 1) Commencement of mining; 2) Binding offtake agreements; 3) Commercial production of phosphate rock; 4) Progression of a large Baobab project and resource upgrades.