GEN completes $10M raise, we participated

Published 04-OCT-2024 15:00 P.M.

3 min read

Shares Held: 3,595,000

Options Held: 1,250,000

Today, our green iron ore Investment, Genmin (ASX: GEN) announced that it has received firm commitments to raise approximately $10M.

We first Invested in GEN in April of this year and have participated in this placement.

The first tranche of the placement is unconditional, and will result in the issuance of 170 million new shares at the issue price of 5c a share, raising $8.5M.

The raise includes a 1:1 option with a strike of 7.5c which expires April 2025.

GEN’s largest shareholder, Tembo Capital, contributed $1.45M for this placement and has also extended a US$1M loan facility that will convert to equity on the same terms in tranche 2 of the placement.

The second tranche of the Placement (Tranche 2) will be subject to receipt of all regulatory approvals, comprise the issue of:

Approximately 30M New Shares to Tembo Capital and participating directors at the issue price to raise approximately A$1.5M.
Approximately 200M New Options to Placement participants.

Shareholder approval is required for tranche 2.

Given how close GEN is to a final investment decision on its iron ore project the price of the company tends to track the iron ore price.

Last week the Chinese Government announced a stimulus package to spur the economy and infrastructure spending.

The iron ore price followed accordingly:

So, we think that now is a good time for GEN to secure the financing with a bump in the iron ore price, particularly given the longer term implications of further stimulus from the Chinese.

The company has already secured four non-binding offtake MOUs from leading Chinese steel mills, including Hunan Iron & Steel - an early backer of iron ore giant Fortescue Metals Group.

But what we really want to see now is progress on financing and binding offtakes.

GEN is seeking to ultimately secure approximately $200 million through a combination of debt and equity financing.

The funds will be used to construct a 5 million tonne per annum starter mine and associated infrastructure at the Baniaka project in Gabon, with the goal of commencing production within 18 months.

With the iron ore price getting a bounce recently off China stimulus, we’re hoping this will add fresh impetus for offtakers and potential financiers to commit support to GEN’s project.

How does this impact our GEN Investment Memo?

We want to see GEN move quickly here across financing and offtakes, any further delays could negatively impact GEN.

Financing and delay risk

The development of Baniaka will require ~US$200M in debt and equity funding to be raised in financial markets.

Financial markets are inherently uncertain and readily influenced by global macro-economic events at the time.

GEN may experience delays in procuring the funding and consequently development of Baniaka through exposure to the sentiment in financial markets, which may adversely affect GEN’s value and share price.

Source: 2 April 2024 GEN Investment Memo