Edison Maintains Unrisked Valuation Above $2

Edison Maintains Unrisked Valuation Above $2, Assesses Fundraising Efforts

27 August 2013

Edison Group has kept a unrisked valuation above $2 for Chatham Rock Phosphate in its latest update in which it examines the company’s ongoing efforts to raise the last of the capital it needs to start producing rock phosphate from the seabed on the Chatham Rise.

The unrisked $2.04 valuation is not much changed from that earlier in the year, but Edison has raised its risk assessment on the basis of a slowing in regulatory approvals and Chatham raising only part of the capital it still needs, in the recent Initial Public Offering.

 Edison notes that “explicit positive sentiment received by CRP from government authorities in April, informing that its mining permit application would be treated with priority, has yet to bear fruit”.

“Uncertainty has weighed on investor confidence, which was an undertone to a weak result from a recently completed public capital raising.”

Edison estimates Chatham needs $7 million to fund its pre-development work, of which half are costs associated with the environmental consenting process.

“CRP has launched a further offer to professional investors that, if successful, and combined with an assumed early part-exercise of a significant tranche of success-related share options by an existing cornerstone investor, should serve to meet its remaining pre-commissioning capital needs.”

The non-retail linked offer is for up to 5 million shares at 32c to raise $1.6 million followed by a further 5 million shares at 35c to close two weeks after the grant of a mining licence to raise a further $1.75 million.  The new shares will have a 2-for-1 70c option exercisable within three months of the marine consent being granted.

Edison says the extended approval processes have added a delay of six months to the timelines the company was targeting until a couple of months ago.

“We now consider it more likely that a distinct two-stage investment decision will unfold, with the stages reflecting the sequenced granting of a mining permit and marine consents.

The first stage would likely see contract miner Boskalis commit to an initial capex programme involving low-risk, transferable equipment that could be redeployed in the event of further delay or worse.  The main commitment would come following the project receiving marine consents, probably in mid 2014, which would act as a trigger for Boskalis to commit the substantial spend to procure and fit out the mining vessel.

ENDS

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