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Cape Lambert Resources secures $4M placement at 300% premium

Cape Lambert Resources has launched its first capital raising since 2005, demonstrating major market confidence in its business model by securing a fully underwritten share placement for A$4 million at a 300% premium price per share.
Cape Lambert Resources secures $4M placement at 300% premium

Cape Lambert Resources (ASX:CFE) has secured A$4 million in new funding to support more streamlined operations as the diversified developer pursues its first capital raising since 2005.

With acknowledgement to the difficult macro conditions facing many companies in the mining space, Cape Lambert is strengthening its cash position via a fully underwritten placement to UK and European sophisticated investors at A$0.0425 per share.

This represents a 300% premium to Cape Lambert’s last closing price, demonstrating strong confidence by global investors in the company's assets and management.

Local investors have reacted to this validation, with stock in the company jumping as much as 85.7% today to $0.026.

Proceeds from the placement will be applied to efficiency initiatives in company operations, including efforts to reduce costs and sell non-core assets.

This strategy is being advanced in the wake of a tumultuous period for commodity prices, global equities and junior resource stocks, which has compelled Cape Lambert to add value by pursuing undervalued acquisitions and retaining long-term exposure through royalty agreements or equity interests.

This approach has been visible in Cape Lambert's activities at the wholly-owned Marampa iron ore project in Sierra Leone, where the company recently finalised a US$20 million funding/royalty agreement with Timis Mining Corporation.

This provided Cape Lambert with a US$2 per tonne royalty on all iron concentrate exported from the mine.


Efficiency milestones

Other moves to tighten Cape Lambert's operational footing in recent weeks have included a farm-in deal with Argosy Minerals (ASX:AGY) aiming to upgrade its Wee MacGregor copper project in Queensland before assessing a potential small-scale mine.

Work at the site to be undertaken by Argosy is expected to drill test strike and depth extensions and bring the historic inventory to JORC 2012 standards as well as define sufficient oxide and transition mineralisation to contemplate a mining operation.

Meanwhile, Cape Lambert has benefited from positive strides on a number of corporate fronts, with the distribution of about A$12.5 million in fully-franked dividend payments and the settling of a A$96 million Australian Taxation Office liability by making a net final payment of $2.4 million and about A$12.5 million in fully-franked dividend payments.

Removal of this debt has allowed the company to focus on Marampa, which has been estimated to have an after-tax net present value of US$1.2 billion.


Analysis

The fact that a placement priced at a 300% premium has been fully underwritten in the current investment environment reflects extremely positively on market confidence in Cape Lambert’s business model.

The fundraiser demonstrates international support for the company on the heels of a strong internal vote of confidence from chairman Tony Sage, who acquired more than 29 million shares in an off-market trade last year.

Importantly, this is Cape Lambert’s first capital raising since 2005, a period during which the company returned more than $250 million of value to shareholders via dividends, capital returns, in specie distributions and share buy-backs.

The new funds will support an enhanced and more flexible operational profile for the company, which has already benefited from a number of streamlining efforts and costs savings, including the extinguishing of a A$96 million debt with the Australian government.

The money will also firm up the company’s footing as it builds on momentum at Wee MacGregor, where Cape Lambert’s new joint venture is planning to develop an operation which historically produced 2,731 tonnes of copper and 1,535 ounces of gold at grades of 6.2% copper and 1g/t gold.


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