"The $US100m bond is expensive money: "The bonds were priced...

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archer555

166 Posts.

21

28/07/21

16:09

Post #: 54843306
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Originally posted by Ashentegra: ↑

The prez says:

▪ Fully underwritten A$313m equity raising (Equity Raising) consisting of:

o An institutional placement (Placement) to raise approximately A$87m

o A 1 for 1.56 pro-rata accelerated non-renounceable entitlement offer (Entitlement Offer) to eligible shareholders to raise approximately A$226m

▪ Approximately 711m New Shares to be issued under the Offer representing approximately 89% of current issued capital

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That looks like a lot of heavy lifting by shareholders. Next stop 44c. We have no CR retail fine print.

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On July 26, 2021, Freeport-McMoRan Inc.’s (“FCX”) 56% owned subsidiary, Koboltti Chemicals Holdings Limited, entered into an agreement to sell its specialty cobalt business based in Kokkola, Finland (“Freeport Cobalt”) to Jervois Mining Limited (“Jervois”). This business was no longer strategic to FCX following the sale of its interests in Tenke Fungurume in 2016 and its cobalt refinery in Kokkola in 2019.

Under the terms of the transaction, Jervois will acquire 100% of Freeport Cobalt for $85 million (in cash and Jervois shares) plus working capital to be determined at closing. In addition, FCX and its noncontrolling interest partners will have the right to receive up to $40 million in contingent cash consideration based on the future performance of the business.

Under the terms of the agreement, the consideration at closing may include up to 9.9% of Jervois shares. Assuming a full allotment of shares, FCX currently estimates its net share of the proceeds, excluding contingent consideration, would approximate $100 million cash plus its pro rata 56% share of 9.9% of Jervois shares.

https://www.sec.gov/Archives/edgar/data/831259/000083125921000025/fcx-20210726.htm

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My bold above.

MC $352m

9.9% of JRV x 800m shares is worth (44c) $35m

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The $US100m bond is expensive money: "The bonds were priced with an annual coupon of 12.5% and an issue discount to par of 2%"

Would you take out a loan at 12.5% ?

Ash

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"The $US100m bond is expensive money: "The bonds were priced with an annual coupon of 12.5% and an issue discount to par of 2%"

I look at it this way:

1. I have invested in JRV because I think that the price of Cobalt will be much higher than where it is today.
2. Do I believe that JRV could have stitched up a much cheaper interest rate than 12.5% on the $US100m corporate bond? Absolutely - but that would have meant signing up offtake agreements at todays prices (FWIW - I have never seen a resources company of a similar market cap get such a significant debt deal over the line without an offtake agreement in place).
3. Do I think that the trading team that JRV has in place can extract higher prices once in production - categorically YES.
4. Would I rather pay a higher interest rate than give up offtake now? - categorically YES.

Arch

JRV Price at posting: 51.0¢ Sentiment: Buy Disclosure: Held
22 Upvote

8 Great analysis

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