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Graphex Mining (ASX:GPX)

Valuation update – fully funded to production

1 Video - Oct 18

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:
    • US$40 million of senior secured loan notes, and
    • 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) from earlier this month:
    • post-tax NPV (10% discount rate) – US$349 million;
    • post-tax internal rate of return (IRR) – 131%;
    • post-tax payback period – 0.84 years, and
    • 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.

The information in this email should not be the only trigger for your investment decision. We strongly recommend you seek professional financial advice whenever making financial investment decisions.

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, click on the image above.

 

Management update – Funding and PFS

1 Video - Oct 18

interview with managing director, Phil Hoskins to discuss the Castlelake financing and the updated PFS.

Chilalo moves forward as graphite sector heats up

1 Video - Mar 18

Graphex Mining (ASX:GPX) has issued a number of recent announcements relating to development of its Chilalo graphite project in Tanzania. Highlights of those announcements include the following. 

  • Statement of Sales Intent signed with multiple parties for 80,000 tonnes of Chilalo graphite.
  • Binding offtake agreements for the sale of graphite expected in the near future.
  • Capital raising of $2.45 million at $0.28/share.
  • Negotiations with prospective partner CN Docking Joint Investment and Development Co. Ltd (‘CN Docking’) continue; there has also been strong interest from other credible parties with respect to development financing. 
 Analyst comment: development at Chilalo has proceeded more slowly than anticipated, due mainly to last year’s legislative changes in Tanzania. However, the light at the end of the tunnel seems to be fast approaching as the project moves forward on a number of fronts. 

Most importantly, Graphex appears to be shoring up project development financing, with new funding options emerging. This is hardly surprising, given not only the quality of the Chilalo project but also the recent uplift in demand for graphite, as highlighted by the number of other developers announcing funding and offtake agreements recently. 

We believe that CN Docking remains in the box seat to become Graphex’s JV partner; however, the alternative funding options being assessed by Graphex may well encourage that company to finalise its agreement in the near term or risk losing the project, as well as (potentially) the all-important offtake. Either way, Graphex looks set to finalise its financing soon.  

The information in this email should not be the only trigger for your investment decision. We strongly recommend you seek professional financial advice whenever making financial investment decisions. 

Valuation: we maintain our valuation of Graphex at  $1.90/share (share price $0.31).  

 Our valuation assumes a discount rate of 16% to allow for risks associated with the project’s location and financing. We will review that assumption once financing is complete. 

Improved flake size significantly improves valuation

1 Video - Sep 17

Graphex Mining announced that as part of their Joint Ventures partners due diligence at the Chilalo Graphite Project they completed significant metallurgical test work.  This has resulted in a significant improvement in the overall flake size distribution to make Chilalo one of the coarsest flake graphite projects globally.  This analysis include:

  • Updated valuation; and
  • Sensitivity Analysis – Graphite price & discount rate.

Management Update – JV partner commitment

1 Video - Jul 17

Graphex Mining (ASX:GPX)  has announced the Chinese syndicate of investors have re-committed to the Chilalo Project, via a revision to the terms of the proposed joint venture and equity investment previously agreed.  We interviewed Managing Director, Phil Hoskins, who discusses the Joint Venture and legislative changes in Tanzania in more detail.

Archive

Term sheet signed with Chinese syndicate – Valuation Update

1 Video - May 17

Graphex has execution a non-binding term sheet for an equity joint venture, offtake and prospective financing for the Chilalo Graphite Project with a Chinese syndicate.  This video provides:

  •  An updated valuation;
  • Highlights the key terms of the transaction; and
  • Upcoming catalysts.

 

Management Update – Term sheet

1 Video - May 17

Interview with Managing Director, Phil Hoskins to discuss the Term Sheet in more detail.  Questions include:

  • Can you please discuss the details of the JV and offtake arrangement in more detail?
  • What does this deal mean for Graphex?
  • What is required to make these terms binding?
  • Can you discuss the financial terms in more detail?
  • Please explain why the offtake is for 50% of production.  How confident are you of securing the remaining 50%?
  • Can you discuss who the Joint venture partners are in more detail?

Valuation Update – Resource upgrade

1 Video - Feb 17

Graphex has announced a resource upgrade at their Chilalo Graphite project in Tanzania.  This analysis includes:

  • A review of the upgrade;
  • Update our valuation analysis; and
  • Comment on offtake negotiations.

Initiation Report – November 2016

9 Videos - Nov 16

Graphex Mining is an ASX listed company currently developing the Chilalo expandable graphite in Tanzania.  This analysis includes:

  • Valuation, investment & risk assessment;
  • Virtual site trip - Tanzania project;
  • Offtake negotiations and exploration potential; and
  • Graphite market review.

Chilalo Project – Site trip

1 Video - Nov 16

Virtual site trip - Chilalo graphite project, Tanzania.  Features:

  • Existing resource & planned mining operation;
  • Process flowsheet;
  • Community surrounding the project; and
  • Existing infrastructure to be utilised for concentrate export

What is graphite?

1 Video - Nov 16

Detailed review of the fundamentals for graphite

  • Sources & applications;
  • Unique pricing characteristics
  • Supply & demand – Current & future