Suvo Strategic Minerals Ltd (ASX:SUV) has received firm commitments to raise $7.5 million with the money to be used to accelerate expansion of the Pittong kaolin plant in Victoria.
As Australia’s only hydrous kaolin producer, the expansion of capacity will be completed in parallel with current production and will not impact the existing operations.
There was strong demand from new and existing sophisticated and institutional investors for the $0.085 per share placement and participants will also receive a 1 for 3 free attaching unquoted option, exercisable at $0.15, expiring June 30, 2023.
Settlement of funds under the placement is proposed for Friday, March 11, 2022, with the allotment of shares the following Monday, March 14, 2022.
Suvo has also announced a share purchase plan (SPP) to raise up to a further A$2 million under the same terms as the placement, including the issue of a 1 for 3 free attaching Option.
There will be no oversubscriptions under the SPP.
The issue price of $0.085 per share is an 11% discount on the 15 day volume weighted average price (VWAP) of $0.096 and a 12.5% discount on the 5 day VWAP of $0.097.
Accelerating development
Funding will enable Suvo to accelerate the expansion of the Pittong hydrous kaolin plant. The $5 million upgrade is forecast to increase processing capacity to ~60,000 tonnes per annum (tpa) by 2023 (currently producing ~25,000 tpa).
The increase will be achieved through the materially enhanced processing capacity and improved energy efficiencies, utilising the newly procured fully automated press deck equipment. The increased capacity is aligned to current market demand, with current production from the operation accounted for until 2023.
New press deck building diagram.
Suvo will also fast track the completion of project studies on its Western Australian kaolin and silica sand assets.
Mitigating risks
Suvo reported gross revenue of $13.5 million and EBITDA of $2.8 million for the calendar year 2021, which included a 23% increase on the previous year’s production levels.
Long lead time items, including three state of the art press deck systems and all ancillary equipment costing ~A$1.5 million, were ordered in August 2021.
The company’s procurement strategy has enabled it to mitigate risks associated with increased manufacturing lead times, cost increases and freight delays, currently faced by the global mining industry.
Suvo funded the purchase of these long lead time items from existing cash flows.
Commissioning of the new facilities is anticipated to be completed in Q1 2023.