Tough Funding Environment
Our silver Investment, Thomson Resources (ASX:TMZ), has tapped the funding well during a difficult period for the market.
In August, TMZ secured a $2.2M share placement agreement with financier Lind Global Fund II.
This week, TMZ confirmed that it had secured an additional $400k under the same facility.
The facility has a two year maturity date and is set up in a way where TMZ can execute placements with Lind based on a specific conversion criteria.
Basically, any time a placement is agreed, TMZ issue shares to Lind at the lesser of:
- Price A = 4.1c per share.
- Price B = 90% of the average of the five lowest daily VWAP’s during the 20 trading days before the placement with a floor price of 1.8c per share.
The agreement has been structured so that if the company’s share price is lower than 1.8c per share, TMZ would need to repay the difference to Lind.
This means that the lowest price at which Lind would be issued shares would be 1.8c per share. In any case, we think that this type of deal creates the same level of churn as an outright placement, but over an extended period of time.
We would expect that whilst the placement agreement is in place, TMZ’s share price will continue to churn sideways.
TMZ is using the funds from the facility to push through to the important 100Moz silver equivalent metric, which was our #1 Objective for TMZ in 2022:
In our latest TMZ note, we detailed how we think the company would manage to hit this target. Read that note here.
These are our bull, base, and bear cases:
- Bullish case = >100Moz AgEq
- Base case = 90-100Moz AgEq
- Bear = 90Moz AgEq
We still think that scenario is on the cards, but we’re increasingly aware of the fine margins TMZ is working with.
From time to time, risks materialise with our Investments and we highlighted the following risk in our TMZ Investment Memo:
