Ann: Cabinda Phosphate Fertilizer Project Funding Update, page-50

@Gladdy1
Replying to Gladdy1 (reply buttoin not working),
The original preconditions included an equity component to cover the US$11mill remaining capex, a US$10mill working capital facility to cover running costs for the time during construction and ramp up to profits and the offtake agreement.

"- evidence of US$ 11 million of funding raised by borrower.
- evidence of working capital facility of minimum US$ 10 million.
- conversion the Grupo Carrinho Memorandum of Understanding into asigned offtake agreement."

In yesterday's announcement;

"The IDC adjusted its condition precedent for the Company to obtain a US$10 milion working capital facility and instead requires the Company to obtain a term loan for US$10 million."

That was a change in the working capital facility condition, not the equity requirement.

The company recently raised around A$7mill or roughly US$4.5mill of the US$11mill capex, leaving further equity of US$6.5mill needed to be raised to satisfy that precondition.
The company also appears confident of strong enough demand to want to go straight to stage 2. That will cost roughly $US4mill.
So to go to stage 2, the company would probably need to raise at least $US10.5mill in equity and it would be wise to raise an extra few mill for contingency. That is in the US$10-15 range being discussed with the sovereign wealth fund.
The wealth fund will look at the project value when making its decision and as others have stated, these types of investments are often priced based on the value of the project rather than a volatile share price.
A few here want us to believe the company is desperate but they are not. The IDC loan approval has helped no end, opening other avenues to complete what is a very modest funding requirement on a project with a value many multiples of the capital requirement.

The extra US$4-7mill to cover the stage 2 expansion does dilute the stock a bit further but it also adds more value. Something not discussed by those talking about "massive" dilution. I'm not sure what their idea of massive dilution is because those types of sensationalised posts are never substantiated, but below are some real numbers.

Total current ordinary shares 878mill
Total of all outstanding options (including a small number of performance rights) 173mill
Fully diluted securities 1.052bill

From here, there is some guess work on the potential cr to the sovereign wealth fund. US$10-15mill likely equity but at what price and is it $10 or 15mill?
I think it will be closer to 15 and I think it will be well above 5c but what I have assumed here is US$10 or A$15mill at 5c. Others can make their own assumptions and it won't make a big difference.
A$15mill at 5c would add 300mill shares to the above 1.052bill fully diluted shares.
That dilutes the stock by 30%
If it is US$15mill at 7c, the dilution would be about the same. At 10c the dilution would be less.

Going back to the 30% calculated above and 1.352 fully diluted shares, at 5c that would result in a market cap of A$67mill.
Likely worst case with US$15mill raised at 5c is a market cap of $75mill at a 5c share price.
Compare that to the A$300mill after tax, base case NPV.
Even with the likely worst case US$15mill at 5c, the A$300mill after tax, base case NPV leaves 4 times upside from the current market cap after fully diluting the market cap for all outstanding options and the cr to the sovereign wealth fund.
If a base case four times your money in a year isn't a good enough 1 year return for investors, there is always the 5% they can make from a bank account.

I can see further upside from that base case upside with the NPV increases resulting from announced capex savings of US$10 mill and US$24mill (stage 1 and 2 savings) which totals A$50mill, upgraded guidance on stage 1 production which brings forward cash flows which also increases NPV, the higher TSP price relative to the DFS base case assumption and the green ammonia project.

Some capital raises are a negative when they dilute without adding value but when a cr is used to pay for capex or an expansion, the value added can more than offset the dilution. Not all of MNB's cr's have added value but this one will and a part of previous cr's also added value by pre-paying for major plant components that are now on site.