In raising equity of over £99m, Wolf Minerals has demonstrated...

In raising equity of over £99m, Wolf Minerals has demonstrated investor
appetite for its Hemerdon tungsten project in the UK, while its two key
cornerstone investors will now own almost 75% of the business, up from
56%. Although we have reduced our target price from 28p to 23p to reflect
the increase in issued capital from 198m to 807m, we reiterate our Buy
recommendation given over 37% implied upside from the current share
price. The additional shares should begin trading on AIM today.
? Equity raised: Wolf has announced that it has raised £99.2m in equity at a price
of 16.3p/share, representing a 33% discount to the 20-day VWAP. The
completion of this deal was conditional on shareholder support at an EGM and
this has been confirmed. Proceeds will be used to repay the US$75m bridging
loan from RCF, to complete the construction of the Hemerdon tungsten mine
and for working capital until production commences. Major shareholders RCF
and Todd subscribed for additional shares at the issue price and, post issue,
RCF now owns 337m shares (41.8% of the company) and Todd owns 262m
shares (32.5%). Issued capital will increase to 807m shares on issue.
? Valuation and recommendation: We lower our target price, which is based on
a risked NPV of the Hemerdon project, from 28p to 23p to reflect the additional
dilution given that the raising was completed at a greater discount to the 10%
we were previously assuming. Given c.37% implied upside from the current
share price, we reiterate our Buy recommendation.
? Risks: The risks to the company are significantly reduced now, with Hemerdon
ostensibly fully financed. We have therefore reduced our risking of the asset,
now modelling 80% of the value, up from 70% before. Outstanding risks remain
bringing the project into commercial production and commodity pricing risk.