GEN signs Letter of Intent with potential project co-financier/customer

Our development stage iron ore Investment Genmin (ASX: GEN) has just signed a Letter of Intent for project financing & supply with a state owned Chinese company.

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).

A prior PFS (subject to an update soon) having been done for a 5Mtpa startup operation.

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

And today GEN has announced it has signed a Letter of Intent (LOI) with a major Chinese state-owned enterprise for project financing and co-development.

(Source)

The LOI is from Sino-Hunan International Engineering and Development Co., Ltd (SHICO), with a proposal to fund 60% of total project funding requirement, which would leave 40% for GEN.

Based on the 2022 PFS the CAPEX requirement for GEN’s project is around US$200M total (so that would mean GEN would need to fund ~US$80M).

(assuming the LOI became binding)

GEN has previously announced that the CAPEX for the project could also be reduced.

So there is the potential for this figure to come in lower than US$80M, which would make things easier and enable a higher proportion of the finding required by GEN to be done through more advantageous avenues eg prepayments instead of equity.

Also part of today's LOI is that SHICO reserves an option to enter into a 5-year iron ore purchase contract.

Following on from today’s announcement, SHICO intends to collaborate on areas including integrating Chinese engineering, fabrication, and supply chain expertise.

What’s next for GEN?

Updated PFS

GEN confirmed during the raise that the updated PFS would be prioritised. (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.

Today GEN has signed a LOI with Sino-Hunan International Engineering and Development Co., Ltd (SHICO), so we await to see if this turns into something more binding (which was mentioned in the announcement they are working towards this soon).

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