Walkabout Resources Ltd (ASX:WKT) (FRA:N6D) has raised A$6.4 million in tranche one of a staged placement that will enable it to advance construction of the flagship Lindi Jumbo Graphite Mine in Tanzania.
The company has received firm commitments led by institutional investors in Australia in the first stage of its Companion Equity process.
This initial tranche of project funding allows the company to mobilise the major contracts to start construction of the Lindi Jumbo project.
A revised construction schedule has been adopted to better match the expected timing of further equity contributions.
The net proceeds, led by institutional investors, will contribute to the project debt facility companion equity requirement and provide working capital.
Placement details
As a part of the placement, the company will issue 32 million ordinary shares at A$0.20 per share.
The issuance of shares will be completed without shareholders’ approval, utilising the company’s existing capacity under the ASX Listing Rule 7.1.
To comply with ASX existing rules, the company has adopted a staged capital raising process, which will also help the company continue with construction.
Proceeds from the placement will be used for various activities including:
- Further development of the Lindi Jumbo Graphite Project to completion including fulfilling the minimum equity component to facilitate debt drawdown conditions for construction; and
- General working capital purposes.
Lindi Jumbo mobilisation
Proceeds of the Stage 1 placement net of costs and replenishment of corporate funds will make approximately US$4 million of companion equity available for injection into the Lindi Jumbo project.
This equity will represent a third of that required as a condition precedent to unlock the US$20 million project debt from CRDB.
Project expenditure from the Stage 1 injection will be approved by the independent project manager as a component of the required companion equity.
This debt facility agreement has no deadline for the satisfaction of the companion equity injection.
The company plans to use will use the stage 1 injection to start the construction through mobilisation of its EPC contractor Jingpeng Engineering and other material contractors in Tanzania.
The focus of project works will be:
- The procurement, manufacture, assembly, testing and shipment of the processing plant equipment and components;
- Civil works to prepare for the installation of the processing plant; and
- Other critical site works.
According to the company, the restart of construction demonstrates how Lindi Jumbo has full approval for construction and project implementation through the relevant authorities in Tanzania.
Revised construction schedule
Adapting to staged equity injections, the company has revised its construction schedule by reducing the extent of planned activities which are not on the critical path in the first three months.
Reduced upfront spend facilitates slower on-site build up and de-risks contractor programs and timelines after mobilisation.
The level of planned expenditure for the first three months has been revised from an original US$8.9 million to a proposed US$5.7 million.
This rescheduling only increases overall capital costs by less than 0.5% while the impact on the elapsed schedule is around one additional month.
Proposed rights issue
As a part of its plan to raise funds, the company intends to issue an offer document in the coming weeks for a 1 for 10 non-renounceable rights issue for eligible shareholders to subscribe for new ordinary shares also at 20 cents per share.
Shares issued under the institutional placement would be eligible to fully participate in the right issue and the company could raise up to A$7.6 million to fund Companion Equity Stage 2, which can fund at least another two months of the revised construction schedule.
Eligible shareholders will also be able to apply for additional shares over and above their pro-rata entitlement, as determined by the company’s board.
Stage 3 Companion Equity
The company has several months to arrange and receive Stage 3 Companion Equity funding, though it has other options available.
It is expected that with the further de-risking of the Lindi Jumbo project, that:
- EPC and other contracts will be signed and operating;
- Plant construction will be more than a third complete by cost on fixed price contracts;
- Active site construction will demonstrate in action that no further regulatory approvals are required;
- Containers of plant including long lead time items will be successfully shipped from China and stored on-site in Tanzania; and
- The only remaining condition precedent for the CRDB debt drawdown will be the stage 3 Companion Equity injection.
Directors believe the company has multiple alternatives to raise the Stage 3 Companion Equity before the required time, including but not limited to institutions that participated in the Stage 1 institutional placement and expressed a strong desire to follow on in the Stage 3 capital raising, depending on the structure of that transaction.