Cadence Minerals (KDNC) has successfully raised its portion of the capital required to fund the restart of the Azteca plant in Brazil. 

Cadence has received subscriptions to raise £2.16 million through the issue of 72 million shares at a price of 3p each.

A retail offer to raise a further £200,000 is also underway.

In addition, directors have directly subscribed to the company for six million shares at the issue price, bringing the total to £2.34 million.

This ensures that Cadence can meet its contribution to the Azteca plant financing. The company will contribute approximately 11% of the Azteca plant capital expenditure, with the balance funded by its offtake partner. This agreement is expected to cover all refurbishment and working capital requirements to bring Azteca into a cashflow-positive position.

The Azteca plant is expected to produce around 380,000 tonnes of 65% iron concentrate per year, forecast to deliver approximately US$32 million in free cashflow over three years.

Cadence's 10-15% contribution to the US$4.6 million prepay is expected to generate an internal rate of return of around 70%, with cashflow positive operations from the first shipment.

Free cashflow from Azteca will fund working capital, operations, the definitive feasibility study and early works for the full 5.5 million tonnes per year project. 

"This financing is a pivotal step for Cadence,” said Kiran Morzaria, Cadence’s chief executive. 

“Although equity dilution is never taken lightly, it is the pragmatic way to unlock near-term revenues and move Amapá into production. By securing our contribution to the Azteca restart, we are laying the foundation for a self-funding development pathway - one that delivers cashflow, and drives long-term value for shareholders. The restart of Azteca not only provides immediate returns, but also demonstrates Amapá's quality to the market, strengthens our licence to operate, and funds the next stage of development through the DFS and early works. While additional funding may be required to deliver the full 5.5 million tonnes per year project, today's raise ensures we have a disciplined, phased route from near-term cashflow to long-term growth."

 

View from Vox

 

It’s great to see this project moving forwards against the backdrop of renewed interest in the mining sector. Execution risk remains a factor, of course, but the numbers are compelling, and Cadence’s estimate of a 70% return on its portion of the funding, makes for very attractive reading.