Hillgrove Resources Ltd (ASX:HGO) has wrapped up a bookbuild process to boost its war chest by up to $39 million, through a placement, a commitment from Freepoint Metals and Concentrates LLC, and a share purchase plan (SPP) targeting existing investors.
The package
A two-tranche placement of new fully paid ordinary shares to institutional and sophisticated investors will raise $19 million at a price of $0.053 per share.
Additionally, the company has also received a commitment from Freepoint Metals and Concentrates LLC for raising up to $17.2 million more, before costs, through an additional two-tranche placement of new shares to Freepoint.
To top it off, existing shareholders will be offered the opportunity to participate in an SPP to raise around $3 million.
The combined equity raise will boost the bottom line by up to $39 million at a price of $0.053 per share.
Hillgrove has also entered a binding, conditional term sheet with Freepoint, providing HGO with a price protection program for at least 16,000 tonnes of copper in concentrate, approximating to 50% of the first two years’ production.
Funding to transform to producer
The placement, the Freepoint deal and the SPP will provide Hillgrove with the equity funding to transform the company into a producer at its 100% owned Kanmantoo copper-gold project in South Australia.
The proceeds of the capital raise will be used to fund:
- development for the Kanmantoo Underground, along with sufficient contingency;
- exploration to continue to expand the resource and extend the mine plan; and
- general working capital purposes.
A recently announced economic assessment sets out:
- first copper sales seven months after mobilisation;
- more than $200 million in after-tax free cash flow to be generated over an initial four-year mine life; and
- significant additional upside leverage to increases in the copper price and further resource expansion.
“We are pleased to announce an equity funding package which facilitates the commencement of the Kanmantoo underground operation to generate cashflow through production, along with continued mine expansion drilling,” Hillgrove CEO and managing director Lachlan Wallace said.
“The Kanmantoo Underground Stage 1 presents a unique opportunity to produce copper in a Tier 1 jurisdiction, generating post-tax cash flows in excess of $200 million in the initial stage.
"With all infrastructure and permitting in place, the project is well positioned for a fast, low capital restart, with first copper production only seven months post mobilisation.
“The resource potential is exciting, with 143 mineralised intersections from 122 holes, resulting in the increase in mineral resources from less than 1 million tonnes in 2019, to almost 7 million tonnes in 2022.
“Such high exploration strike rate and resource conversion provides confidence that further drilling may increase resources and expand the mine plan and generate more value for shareholders.
No debt for Kanmantoo
“The equity-based funding enables the Kanmantoo project to start without debt.
“The high level of interest for the placement participation also demonstrates strong support for the project, particularly from Freepoint, a significant shareholder and offtake partner.
“Freepoint has been a long-standing supporter of Hillgrove and the Kanmantoo project for many years dating back to the early days of the open pit development.
“Their leadership in the placement demonstrates their strong commitment to the development of the Kanmantoo underground project and appreciation of the on-lease exploration upside.
“The capital build of $25 million makes Kanmantoo one of the lowest capital-intensive development projects in the world.
“The funding provides contingency to be able to vary the schedule based on the drilling if required, which is considered prudent in the initial ramp-up.”