GEN raises $25.7M for iron ore project in Gabon

Our development stage iron ore Investment Genmin (ASX: GEN) just raised $25.7M.

GEN owns 100% of the Baniaka iron ore deposit in Gabon.

The project has an 758.7Mt resource at 36.7% and is at the development stage.

(including a 48.2% high grade component that GEN is looking to develop first, source)

Basically, GEN has:

• Long term power supply agreement
• Long term rail agreement
• Long term port agreement
• Offtakes with 4 Chinese steel manufacturers
• Mining Convention and Permitting signed

Now, all that GEN needs is to get project financing locked in and the project put into development.

GEN’s share price has come down from our Initial Entry Price of 10c to now trade at 1.1c.

We think a big part of this move lower is attributable to the market losing patience in GEN getting development financing locked in for its project.

Interestingly, GEN has actually taken the project forward over that period (despite the share price move)...

GEN’s already signed the critical Mining Convention and started early civil works on site.

These works include construction of a 60km haul road, a 30km transmission line and an accommodation village that will house the workforce with plans on these advancing, plus bulk earth works and processing plant civil works.

We are still backing GEN and we actually added to our Position in the 1c capital raise.

We liked that the company’s directors also came in on this round for ~$7.7M (converting loans they had made to the company into equity).

(Director participation is always a good signal for us).

We especially liked that Greg Lilleyman - GEN’s new executive chairman - was willing to role in all of his personal loans to the company into stock… (source)

Greg has experience working on large scale iron ore projects having previously worked for $62BN Fortescue Metals Group as COO between 2017-2021.

There has been some coverage on this raise in the media, so you can read up a bit more on Greg in this article from The West - Former Fortescue executive Greg Lilleyman backs Genmin’s $18.3m raising for Gabon iron ore project.

Greg was actually at Fortescue when they entered Gabon for their Belinga project… so he will know Gabon relatively well.

Greg was also one of the 8 people to be mentioned in a recent AFR article we read covering the African “iron ore boom”.

GEN’s project also gets a mention and the article explains the bull case for African iron ore projects relative to the assets here in Australia.

Its a really good read for anyone interested in African iron ore - check out the full article here: What the world’s biggest mine means for Australia's iron ore empire

How are the funds from the raise going to be used?

GEN’s raise was at 1c, and the placement also came with 1x option exercisable at 1.5c for every 2 shares subscribed and then a “piggieback option” for those that exercise these options within 1 year, these will have a 2c exercise price.

(the “piggieback option” only comes into play when someone exercises those 1.5c oppies)

On a pro-forma basis (after all the stock is issued) GEN should have ~$16.4M in cash.

Funds from the raise will be used for an updated PFS and to take the project through to Final Investment Decision.

(Source)

This updated PFS is being called the “PFS Addendum”, having already commenced a little bit back and in the presentation put out with the raise, GEN said this would have a “rapid completion schedule defined”.

GEN mentioned in a prior update which claimed that the expected CAPEX for the project is now forecast to cost less than the prior 2022 feasibility study, we covered this update here.

So with the project through the feasibility stage and now being refined, funding is the next key step to get the project into production and the raise will allow GEN to take this through to FID, with project funding (CAPEX) required to achieve this.

The below image is how we have seen things play out:

The project is expected to begin as a 5mtpa processing operation that will be powered by green hydro power, then expanding this to 10mtpa.

The hydropower in the area is operated by PowerChina (Power Construction Corporation of China), who GEN have an agreement with to supply power for 20 years.

PowerChina is also driving financing talks with Chinese funding partners.

(Source)

We know from prior MoU’s signed, GEN has 3 of the top 15 global steel producers with these 3 being Chinese based, which includes Baowu Resources Co. Ltd.

Based on an analyst report from earlier in the year, GEN could partner with any of the following to get that financing:

• Chinese company (with which it already has an offtake MoU),
• Chinese construction company with a presence already in Gabon.

What’s next for GEN?

Updated PFS Addendum

GEN confirmed during the raise that the updated PFS (PFS Addendum) has a “rapid completion schedule defined”. (source)

Earlier in the year, GEN put out an update where a partner had rerun some numbers and found out that the expected CAPEX for the project is now forecast to cost less than the prior 2022 feasibility study and was looking into other areas as a result, we covered this update here.

So we await to see the updated numbers and the outcome of this.

Project financing update (US$200M CAPEX financing)

We want to see GEN show a pathway to getting its project financed and into construction.

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.

Milestones

🔄 Binding offtake #1

🔄 Binding offtake #2