GRÄNGESBERG EXPLORATION Hours before the Christmas weekend, GRANGEX announced a Royalty and off-take agreement with Anglo American of USD 5m + 12.5m for the part-funding and development of the Sydvaranger Mine, along with a rights issue of SEK 81m. This is an important step forward for the venture into Sydvaranger, as evidenced by the 23% surge in the share price on the news. The capital injection will cover the first installment for Sydvaranger of USD 20m due on March 31st, 2024, but GRANGEX will need to raise additional capital to meet the price tag of USD 33m and the subsequent development expenses. While the case in Dannemora already offers good potential for shareholders, we await the updated Feasibility study to include Sydvaranger into our NPV, but note that the first data points from Sydvaranger indicate an even greater potential than in the previous DFS (i.e. an NPV well above USD 550m) when raising the output from blast furnace concentrate to direct reduction iron ore, and accounting for significantly higher iron ore prices. Interestingly, the separate funding of subsidiary Sydvaranger will provide a fresh data point on valuation of Sydvaranger already in Q1’24, most likely exceeding parent company GRANGEX’ current market cap of SEK 200m.
Johan Widmark | 2024-01-08 09:30
Teaming up with Anglo American for another deal
Following the announcement of the acquisition of Sydvaranger Mining AS, GRANGEX has now entered a Royalty Agreement with Anglo American, securing part-funding for this acquisition and future operations in which Anglo American will provide USD 17.5m in exchange for a life-of-mine off-take and royalty of 3% of the production from Sydvaranger. This is however conditional upon the subsidiary Grangex Sydvaranger securing an equivalent amount of financing by 31 March 2024, which will be done in a separate raise to strategic investors during Q1’24 (which will then provide a valuation of GRANGEX’ holding in Sydvaranger). The deal also covers a future USD 50m contribution at yet unspecified conditions, for the restart of Sydvaranger. This partnership significantly reduces risks for GRANGEX and supports its strategy to supply ultra-high-grade magnetite concentrate for ’green steel’ sectors in Europe and globally. An updated Feasibility Study will be completed within 12 months post-acquisition, which will also define a sustainable tailings disposal method acceptable to both parties.
Summary of the rights issue
The announced rights issue of SEK 81.2m (5.8m shares) has a subscription price of SEK 14 per share. The issue is backed by senior executives and main shareholders with SEK 11m, and external guarantors with SEK 50m, covering 75% of the issue. Proceeds will be aimed at financing the Sydvaranger mine purchase/operation after repayment of a SEK 20m bridge financing. Subscription period runs from 5 to 19 February 2024. Complete terms will be published in a prospectus on 2 February 2024.
Several milestones for investors to look forward to
After the short-term financing round to be concluded in February we now look forward to:
• The separate funding of Sydvaranger in Q1’24 which will provide a valuation of GRANGEX’ holding
• updated DFS and commencement of drainage of Dannemora in Q1’24
• the major capital raise slated for 2024
• updated DFS for Sydvaranger later in 2024
• Production start in Dannemora in H2’25
• Final Investment Decision for Sydvaranger in H1’26
DISCLAIMER
This commissioned research report is for informational purposes only and is to be considered marketing communication. This research does not constitute investment advice and is not a solicitation to buy shares. Information provided here or on Emergers’ website emergers.se is not intended to be financial advice. This research shall not be construed as a recommendation or solicitation to invest in the companies described. Emergers cannot be held liable for either direct or indirect damages caused by decisions made on the basis of information in this analysis. Investors are encouraged to seek additional information as well as consult a financial advisor prior to any investment decision.
This material is not intended to be financial advice. This material has been commissioned by the Company in question and prepared and issued by Emergers, in consideration of a fee payable by the Company. Emergers charges a standard fee for the production and broad dissemination of a detailed note following by regular update notes. Fees are paid upfront in cash without recourse. Emergers may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.
Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained herein represent those of the research analyst at Emergers at the time of publication. The company has been given the opportunity to influence factual statements before publication, but forecasts, conclusions and valuation reasoning are Emergers’ own. Forward-looking information or statements contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.
Exclusion of Liability: To the fullest extent allowed by law, Emergers shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained in this material.
No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Emergers’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in this material may not be eligible for sale in all jurisdictions or to certain categories of investors. Investors are encouraged to seek additional information as well as consult a financial advisor prior to any investment decision.
Investment in securities mentioned: Emergers has a restrictive policy relating to personal dealing and conflicts of interest. Emergers does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Emergers may have a position in any or related securities mentioned in this report, subject to Emergers’ policies on personal dealing and conflicts of interest.
Copyright: Copyright 2023 Incirrata AB (Emergers)
United Kingdom
This document is prepared and provided by Emergers for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ”FPO”) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.
This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.
United States
Emergers relies upon the ”publishers’ exclusion” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Emergers does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.
