Queensland Bauxite Limited (ASX:QBL) announced that it has secured the support of New York based investment firm Magna in providing a facility of US$2.0m in Capital and Development finance for project development of the flagship South Johnston DSO Bauxite Project in northern Queensland.
The company has estimated capital costs of approximately $5.0m to get the project into production. With ongoing initial operating costs, this facility underwrites the company’s ability to potentially bring the company to a cash flow positive position without having to rely further on the uncertain capital markets in the current climate.
Magna MD, Ari Morris commented, “We are proud to support QBL during their exciting growth phase. We invest in companies with clear short term growth opportunities, and partner with them to create long term value. We see QBL as a stand out opportunity in the sector, and we look forward to seeing the company achieve its stated milestones for the benefit of all shareholders and investors.”
The confidence that Magna has given the company and its future potential is greatly appreciated by the company and is reflected in the favourable terms of the facility. Magna has allowed US$500,000 of the facility to be immediately available to the company, with a further US$750,000 available upon grant of the MDL, and further US$750,000 available 45 days after the grant of the MDL.
Once drawn down, the company will have the option to repay the facility within 12 months of drawdown at a 20% premium, or issue shares to Magna at a 20% discount to market price based on VWAP formula of the then previous 10 trading days. Any issue of shares will be subject to ASX Listing Rules 7.1 or shareholder approval.
The cost of the facility is an issue to Magna initially of 2,846,084 options in QBL at 6c per share exercise price, expiring 30 August 2018, and a further approximately 4 million options (exact amount dependent upon the USD/AUD exchange at the time) for each US$750,000 drawn down should the company wish to draw down those funds.
Securing the support of Magna is a significant step for the company by underwriting the company’s ability to develop the South Johnstone Project and to get the project into production.
Following today’s announcement, QBL’s share price has gained 18 per cent and is currently trading at 1.3 cents (1500AEST).
Author: Imran Valibhoy
Sep 09, 2015
Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.