GEN - $2M in funding secured from Non-Exec chair
Our African iron ore Investment, Genmin (ASX: GEN), put out a funding update this morning.
GEN announced that non-executive Chair - Greg Lilleyman - provided the company with an unsecured $2M loan.
This comes a few weeks after major shareholder Tembo Capital also tipped in $3M via a loan.
Typically, we wouldn't think much of an announcement like the one from GEN today.
BUT for GEN, it comes at a really good time.
GEN’s iron ore project is “shovel-ready” - meaning all it needs to get into production now is financing.
The only hurdle between GEN’s project being developed now is the ~US$200M CAPEX funding needed to get the project into production.
(GEN’s project has a post-tax Net Present Value (NPV) of US$391M)
GEN still maintains a 100% ownership of the asset, so it has some flexibility in how it tackles financing options.
Based on a recent analyst report, GEN could partner with any of the following to get that financing:
- Chinese company (with which it already has an offtake MoU),
- Non-China steelmaker,
- European trading house, and
- Chinese construction company with a presence already in Gabon.
(Source - Foster’s Stockbroking Analyst Report)
The reason we think the loans from Tembo and Greg come at a good time is because a lot has changed in the country in the past month or so that we think could bring forward any financing discussions that could have been put on hold…
A few weeks ago, GEN got its mining convention signed, which was the final permitting hurdle before the project could be put into development.
Gabon also went through an election process, with the same government retaining power.
So GEN is now in a position where all of the permitting is complete and Gabon has gone through an election process, giving potential partners a lot more certainty over the process tenure and economics…
That’s why we think today’s announcement comes at a good time.
GEN is currently in a position where it has all of the following:
GEN just needs to buy itself enough time (without a big dilutive capital raise) to get a financing deal signed…
Then the market can start to value the company as if it’s project is going into construction.
Right now we think the market is valuing GEN on a “cum raise” basis - which is when the market can see that a company’s cash balance is running low, and expectations start to be built in for the company needing to raise cash.
IF GEN can deliver a big financing deal, it could wrongfoot the expectations of the market, which we think could be a catalyst for GEN’s share price.
More on the loan terms:
Here are the loan terms from today’s announcement.
We noticed that the interest is all capitalised meaning GEN wont have to give up any cash on a monthly basis servicing the loan.
We also noticed that there is an option to repay the loan via “the issue of new equity” which is also a good sign…
What’s next for GEN?
🔄 Project financing update (US$200M CAPEX financing)
The main catalyst we want to see GEN deliver now is project financing. This is what the market will want to see now, given that all of the permitting and technical work has been completed.
Milestones
🔲 Confirm funding strategy
🔲 Secure debt financing
🔲 Secure equity financing
🔲 Secure binding offtake agreements
🔲 Secure prepayments for offtake or other strategic capital partners.
🔄Convert offtake MoU’s into binding agreements
In the near term, we are looking for GEN to make progress across its offtake MoUs.
With 4 non-binding MoUs for offtake already secured, we think GEN will be looking to make these offtakes binding and, in doing so, firm up the financing picture.
We expect there would be some competitive tension around GEN’s premium product, and things could move quickly once any of these 4 MoUs are converted into a binding agreement.
