Beaufort Securities Stratmin Global Resources (LON:STGR) –...

Beaufort Securities

Stratmin Global Resources (LON:STGR) – Speculative Buy

Stratmin has announced today a farm-in agreement with Bass Metals (Bass), an Australian listed (ASX) resources company, for Bass to acquire up to 35% interest in the Loharano Mine and processing operations of Stratmin for an investment of £2m in two tranches, for an initial interest of 25%. The agreement also allows for Bass, subject to the successful completion of the Initial Investment by 30 November 2015, to acquire, at its sole discretion, a further 10 per cent interest in Graphmada Mauritius* prior to 31 December 2015, for a consideration to be determined by reference to the share price of StratMin at the time of the election to exercise the option.

The collaboration with Bass provides StratMin with a cost effective mechanism to access the sophisticated graphite investor base in Australia. The ASX currently has a number of listed graphite project developers and producers with a combined market cap in excess of A$1 billion. The ASX has active graphite stock trading, major institutional investor participation and equity research coverage on the sector from a number of international banks and broking houses. By partnering with Bass, StratMin is gaining exposure to this market and an efficient source of development capital. As the only successful new greenfield graphite mine developer, StratMin, and its Graphmada Mauritius subsidiary, are a differentiated opportunity in the Australian market.

(*Bass to invest £2 million in Graphmada Mauritius, the 100 per cent owned subsidiary of StratMin, which in turn is the 100 per cent owner of Graphmada S.A.R.L. the license holder and mine operator of the Madagascan assets.)

Our view:

This transaction enables the Company to fund the group with investment at a substantial implied premium to the current share price and demonstrates a strong endorsement of our strategy. This is an excellent way forward for Stratmin and we applaud management for its execution.

Working with Bass is a cost effective entry to the very sophisticated graphite and renewable energy investor base in Australia without the cost of a dual listing. Further, this transaction reduces the funding risk going forward for StratMin by giving it access to a large and active graphite investor pool and gives the Company the confidence to look at more significant transactions going forward. Stratmin have an opportunity now to capitalise on the early mover status they have gained and whilst most of the peers are focused on completing feasibility studies and cost cutting, together with Bass, Stratmin can work on expanding production from Loharano and developing new opportunities.

We reiterate our Speculative Buy