An innovative, high-yielding Australian Securities Exchange (ASX)-listed note will be at the centrepiece of a capital raising and debt refinancing being conducted by aspiring diversified miner, TerraCom Limited, the combination of which will fund an expansion into a bauxite project in the West African nation of Guinea.
TerraCom plans a low-cost operation in Guinea that could export up to 5 million metric tonnes of bauxite a year, from a total mineral resource of 73 million tonnes. The company estimates a 13-month development program could take it from “boots on the ground” to first ore shipment.
The vehicle for the Guinea project is Anglo-African Minerals plc: in February, TerraCom struck a binding term sheet to acquire AAM and its three bauxite projects in Guinea, partnering with the private office of Sheikh Ahmed Bin Dalmook Al Maktoum (a member of Dubai’s ruling family) to do so. TerraCom paid a $US500,000 refundable deposit for an exclusivity period until 31 August 2020 – this was subsequently extended to 31 October.
TerraCom is focused on bringing the smallest of the three bauxite plays owned by AAM, the Forward African Resources (FAR) project, to market, targeting 70 million tonnes of export quality bauxite resources. The company expects an initial production rate of 3 million tonnes per annum (mtpa), between 13 and 16 months from the start of development work, increasing to 5 mtpa over the following 12 months...
TerraCom debt provider, investment management firm OCP Asia – which holds a $25.4 million convertible note – is the cornerstone investor for the Notes, subscribing for $80 million. Gleneagle is pitching the rest at both institutional and retail investors, firmly in the high-yielding securities market – which brings into play investors such as self-managed superannuation (SMSF) funds.“The reason we structured it like that is because the upside in the equity will be as a result of the refinancing taking place. The capital raising – that is, the issue of the Notes – will be a catalyst for equity upside in TER shares, and we thought the buyers of the Notes deserve to participate in that equity upside. You can have the cake and eat it, so to speak” says Baylis.
“At 800 basis points over BBSW, call it a coupon of 8%–8.5% over the three-year life of the asset,” says Baylis. “Plus, you then get the options on top, which will effectively juice-up the yield, depending on what happens with the share price. Our working assumption would be that the refinancing gets done, and subsequently the equity price goes up: let’s assume, for example, that the share price goes to 50 cents. In that case, you would be making an annualised return of about 14% over the life of the bond.”
TerraCom Ltd is an ASX-listed resource developer and export thermal coal producer at the Queensland industry icon mine, Blair Athol. In June 2020, TER completed the 100% acquisition of ASX-listed and South African thermal coal producer, Universal Coal (UNV).
TER has counter-cyclically placed itself in a position to improve efficiency and margins plus pursue organic mine growth. Cashflows will further swell once currently depressed coal prices rebound. These assets appear undervalued compared to our Base Case $0.27/share NPV valuation of TER. TER has upside on management’s record of delivering new projects from currently controlled development assets and/or by opportunistically securing acquisitions.
TER heading into blue sky territory today after announcing that coal from their Blair Athol mine is fully sold until the end of July 2022. The increasing coal price hasn't been hurting either. When I last posted six months ago, TER was getting $177/tonne, now its $300+/tonne.
Given the current geopolitical and energy crisis, coal isn't going anywhere anytime soon.
View attachment 139196
Or, too good to be true?All coal companies are going to be reporting some significant profits over the next two quarters. Is it too late?
Remember, it is Labor now in power. Appease the Greens and solve a problem (while creating another)The British government said it would use a windfall profits tax on oil and gas companies to help raise funds for direct payments to households, totaling about £15 billion ($27 billion), to ease the country’s cost-of-living crisis.
"I would agree the Coal companies will get hammered.Or, too good to be true?
Remember, it is Labor now in power. Appease the Greens and solve a problem (while creating another)
Or, too good to be true?
Remember, it is Labor now in power. Appease the Greens and solve a problem (while creating another)
"I would agree the Coal companies will get hammered.
If a Tory government in the UK can tax energy companies it will be a green light for others to follow, especially our own ALP and those green chappies.
gg
and a shot across the bowsI would agree the Coal companies will get hammered.
If a Tory government in the UK can tax energy companies it will be a green light for others to follow, especially our own ALP and those green chappies.
Agree 100%I'd prefer TER to continue on their current path, run the mine out and maximise dividends.
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?