CXO Financing and RuiFu Agreement

I want to take everyone thought a history lesson and my thoughts on the RuiFu financing to date. In summary – I’m not a happy shareholder regarding financing communication and progress. I would like to hear others view points on this though.

 

On the 30^th July 2018 we get the news that financing appears to be sorted and management state ”Core and RuiFu are committed to expeditiously concluding binding agreements within the next several weeks.”

Everyone jumps for joy, happy days,financing is done and dusted - how easy was that!

Then we get this weird update on the 5^th of September 2018 saying that Argonaut has been appointed to help with “delivering the optimal financing package”.

Most punters are thinking, that’s a bit odd, why are we wasting options on these guys when we were told the RuiFu deal was happening in the “next several weeks”. At this point I’m starting to think things aren’t going so well and we need help to get this deal over the line.

Go to 30^th October (3 months after the initial news of “several weeks”) and clearly things aren’t going as smoothly as planned with RuiFu, but the quarterly still seems upbeat.The wording is somewhat changed though and now we are being told “strong progress has been made in establishing the core commercial framework for these agreements”. At this point clearly weeks is out of the question.

A month later on the 6^th December 2018 and we get a share placement notice and a deferral of the DFS. I’m pretty annoyed, but am thinking that it’s no coincidence that the RuiFu deal and the DFS are both now planned for “completion in Q1 2019”.Now management are no longer “expeditiously concluding binding agreements”, but “continue to work diligently”. The only saving grace is that RuiFu stumped up some cash, so there is some interest still there otherwise why waste the million bucks?

4 days later (10^th December 2018) it is reaffirmed that “Ruifu and Core continue to work diligently towards execution of binding agreements, with the expectation of completion in Q1 2019”

Fast forward 2 months later, and we are at today a full 7 months (30 odd weeks) after we first heard about this RuiFu deal and we get 2 announcements, and I’m going to be honest, I’m not happy about it.

We get the Hang Gong update – awesome,more minerals and the potential of even more, but we get this vague snippet stating that Core is negotiating further agreements with some of Asia’s largest lithium consumers. No mention of Yahua or RuiFu at all – normally management trot the names out as much as possible.

Then the afternoon quarterly announcement where there is no mention of financing being expected in the March quarter any more, and no mention of timeframes or “working diligently”.

So I’m left to wonder – WTF Core? Can I assume nothing happened regarding financing? Based on my experience in companies like this, financing is the single biggest issue remaining, and to date, management have completely misled the market as to how close this deal really is, with subsequent announcements slowly but surely softening the language used regarding an agreement.

I’m also wondering what the hell Argonautis doing… 5 months on the job and not a single update?

I will be emailing the company shortly with a please explain, but this is the first time I have seriously considered if I retain my CXO holding, or sell up and move back to a different Lithium play like PLS which is essentially de-risked and heavily undervalued.

 

 

For those of you that want to check the announcements/timeline, I have copied the pertinent financing bits and pasted below (bold text is mine).

 

30/07/2018: US$35M Pre-payment and ConcentrateOfftake in Non-binding Term Sheet with Shandong RuiFu Lithium

A number of terms remain to benegotiated by the parties, and the full details of these discussions remainconfidential, however strong progress has been made in establishing the corecommercial framework for these the agreements, and each of Core and RuiFu arecommitted to expeditiously concludingbinding agreements within the next several weeks.

 

05/09/2018: Argonaut and Hartleys StrengthenCore Capabilities

Emerging Australian lithium developer,Core Exploration Ltd (ASX: CXO) (“Core” or the “Company”) is pleased toannounce that it has appointed Argonaut as a financial adviser.

Alongside Core’s long-term brokingsupporter Hartleys, Argonaut will assist the Company in delivering the optimalfinancing package for development of its flagship Finniss Lithium Project inNorthern Territory, Australia.

Argonaut is a specialist naturalresources financial adviser with offices in Hong Kong and Perth that offerssignificant experience in international equity, debt and hybrid financing,having completed transactions totalling over $10 billion since 2007.

 

30/10/2018: QUARTERLY ACTIVITIES AND CASHFLOWREPORT 30 SEPTEMBER 2018

US$35m pre-payment and concentrateofftake agreement with RuiFu In July, Core announced it had entered into aNon-Binding Term Sheet with Shandong RuiFu Lithium Co Ltd (RuiFu), a subsidiaryof Shanghai Stock Exchange-listed Meidu Energy Co., Ltd.

Under the agreement, RuiFu will besupplied with up to 150,000 tonnes of lithium concentrate offtake per year fromthe Finniss Project, provide a US$35 million conditional pre-payment facilityto the Company, and invest $3 million in Core by way of a Placement, priced at5 cents per share, giving RuiFu a 10% interest in the Company.

RuiFu is one of China’s largestprocessors of lithium from lepidolite and spodumene, and produces and sellsbattery-grade lithium carbonate, industrial grade lithium carbonate, anhydroussodium sulphate, aluminium silicon powder and other products throughout China.

A number of terms remain to benegotiated by the parties and the full details of those discussions remainconfidential; however, strong progress has been made in establishing the corecommercial framework for these agreements.

Both Core and RuiFu are committed toexpeditiously concluding binding agreements.

The agreement, together with thepreviously announced US$20 million pre-payment agreement with Yahua, isexpected to provide a non-dilutive finance solution to develop Grants and buildthe DMS concentrate plant.

 

06/12/2018: Finniss Lithium Project Update

The funds committed by partiesassociated with Ruifu (Ruifu) in the Strategic Placement is unrelated to the $3million commitment previously provided by Ruifu under the non-binding TermSheet in respect of the US$35m pre-payment and concentrate and offtake andassociated placement for approximately $3 million. Both Ruifu and Core continue to work diligently towards execution ofbinding agreements, with the expectation of completion in Q1 2019.

 

10/12/2018: Placement Raises $3 Million toAccelerate Resource Expansion and Expanded DFS at Finniss Lithium Project

The Placement was led by the strongsupport from Core’s binding offtake partner Yahua and non-binding offtakepartner Ruifu, being two of China’s largest lithium producers, who havecommitted to $1.5M of new equity to accelerate resource drilling programs ofthe recently discovered prospects and delivery of the expanded scope of theDefinitive Feasibility Study (“CornerstoneCommitments”).

The funds committed by partiesassociated with Ruifu (“Ruifu”) in this Placement are unrelated to the $3million commitment previously provided by Ruifu under the non-binding TermSheet in respect of the US$35m pre-payment and concentrate offtake andassociated placement for approximately $3 million announced on 30 July 2018. Both Ruifu and Core continue to workdiligently towards execution of binding agreements, with the expectation ofcompletion in Q1 2019.

 

31/01/2019: Finniss Mineral Resource grows to8.6Mt with initial Resource Estimate for Hang Gong Deposit

Core has established offtake andprepayment agreements and is also in the process of negotiating furtheragreements with some of Asia’s largest lithium consumers and producers thatsupport and finance the Project’s modest capex requirements and the Companyinto production in 2019.

 

31/01/2019: QUARTERLY ACTIVITIES AND CASHFLOW REPORT 31 DECEMBER2018

March Quarter Activities:

During the March quarter, the Companyplans to undertake and report on the following activities:

•        Releaseof Mineral Resources at Hang Gong;

•        Furtherexploration and resource drilling results;

•        FurtherResource updates from Finniss Lithium Project

•        Appointmentof new CFO and other key project personnel;

•        Participationand presentations at RIU Explorers Conference and Roskill Lithium
Conference, bothin Perth;

•        Completionand announcement of Definitive Feasibility Study

Placement completed, raising $3million:

In December 2018, Core receivedcommitments to place 60 million new shares at an issue price of A$0.05 pershare to raise $3.0 million, excluding costs.
The Placement wasled by the strong support from Core’s binding offtake partner Yahua andnonbinding offtake partner Ruifu, being two of China’s largest lithiumproducers, who committed to $1.5M of new equity to accelerate resource drillingprograms of the recently discovered prospects and delivery of the expandedscope of the DFS.