GEN sees reduction in capex through Baniaka EPC review

Our development stage African iron ore Investment Genmin (ASX:GEN) had an update on its project in Gabon yesterday.

GEN’s project has already gone through all permitting and feasibility studies and is now at the stage where it's ready to be financed into development.

(in fact some of the smaller scale development work had already started back in March.

GEN is aiming to initially develop a 5mtpa processing operation powered by green hydro power with the aim to expand this to 10mtpa.

Now for GEN, it's all about securing a project financing partner:

Yesterday, GEN announced an update on its collaboration with a subsidiary of PowerChina.

PowerChina (also called Power Construction Corporation of China) is Chinese state owned and experienced in delivering projects AS WELL AS investment and financing.

For some context - PowerChina operates a hydroelectric power plant near the project which GEN has a 20 year agreement to source power from.

GEN has an MoU in place with SinoHydro to prepare an EPC package (Engineering, Procurement, and Construction) for GEN’s mine and the related project infrastructure.

After a review of the engineering design GEN and PowerChina now believe the projects CAPEX could actually come in lower than the 2022 feasibility study GEN had completed.

We also saw that PowerChina had also gone ahead and submitted construction proposals for the infrastructure required.

These proposals include a 60km haul road, a 30km transmission line and an accommodation village for the workforce.

Yesterday’s announcement also had an update on financing

The announcement yesterday also confirmed that discussions with potential Chinese funding partners are advancing, with these talks being driven by PowerChina.

We already know GEN has offtake MoU’s in place with 3 of the top 15 global steel producers who are based in China, including Baowu Resources Co. Ltd

And here is a picture of the signing with Baowu:

(Source)

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?

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