Baobab Resources has ‘comfortable financial position’, extends equity line to £17 mln and gets US$1.29 IFC contribution

Baobab Resources (LON:BAO) is in a comfortable financial position for its drilling and pre-feasibility work through to 2012, according to chairman Jeremy Dowler.

Earlier, it told investors that it has received a US$1.29 million cash boost from the World Bank’s International Finance Corp (IFC).

Now in a second statement it revealed that it has extended its equity line facility (ELF) substantially from £5 million to £17 million.

Initially the ELF was set up in October 2010 with the Dutchess Opportunity Cayman Fund and First Columbus. So far it has drawn-down £1.95 million of the existing ELF. 

The facility allows Baobab to draw-down funds, through the issue of new shares, as and when it requests. The issuance of new shares is linked to the average daily trading volumes. Baobab highlights that it is able to specify a minimum acceptable price for each tranche, to prevent shares being sold in the market at an unacceptable discount.

"(The ELF) helps place us in a comfortable financial position for our planned drilling programmes and pre-feasibility studies into 2012,” Dowler said. “We believe that this is a cost effective solution for some future financings with management being in control of the timing on accessing capital. 

“The enlarged facility will assist in the further acceleration of drilling programmes on the Tete projects as well as the Mundonguara copper-nickel-gold project where warranted and to participate in opportunities that may arise."

Investor interest in Baobab has been increasing in recent months, something that’s quite clear with a quick glance at the chart. The shares have more than doubled in value, from 14 to as high as 56 pence a share, since the turn of the year. Much of the rise has been led by a growing appreciation for the sheer scale of Baobab’s projects in Mozambique. 

Tete has been the focus of extensive drilling in 2010 and the early part of 2011 – there is to be no let up through the rest of 2011 either.

Speaking to Proactive Investors last month managing director Ben James said that Baobab is set for a series of resource upgrades, which may see the Tete’s resource grow from the current 48 million tonnes to about 300 million tonnes by July.

The group’s busy work programme is being supported by the IFC, who is a strategic partner in the Tete project, as well as Baobab’s largest single shareholder - with a 6.26 percent stake.

This morning’s US$1.29 million payment represents the IFC’s pro-rata contribution to the 2011 exploration programme at Tete.

"We are very pleased to announce the continued support of our partner IFC as we accelerate our 2011 work programme at Tete,” Dowler said earlier today.

“It is interesting to note that the corresponding contribution in April 2010 was approximately US$700,000. We anticipate that the IFC will become more involved as the project progresses into pre-feasibility studies and in the facilitation of access to port, rail and power infrastructure."

IFC creates opportunities for people to escape poverty and improve their lives, Baobab highlighted. As part of this remit, the IFC fosters sustainable economic growth in developing countries, by supporting private sector development, mobilising private capital, and providing advisory and risk mitigation services to businesses and governments. 

"IFC is pleased to continue its relationship with Baobab and is working closely with the company to optimize its environmental and social management as it advances its projects in Mozambique," said Andrew Gunther, the IFC's Senior Manager for Infrastructure and Natural Resources in Africa and Latin America.