Euromax Resources
Euromax Resources |
Strategic relationships cemented |
Fund-raising |
Metals & mining |
18 April 2016 |
Share price performance
Business description
Next events
Analyst
Euromax Resources is a research client of Edison Investment Research Limited |
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On 8 April, Euromax announced that it is to raise up to US$30m via a strategic alliance with the mining finance vehicle of Consolidated Contractors Company (CCC). The raising will be in three tranches: a C$5.2m 9% convertible loan note this month, convertible at an equity price of C$0.40/share, plus (subject to the Ilovica project proceeding and CC Mining approval) US$5m in equity in tandem with up to US$20m in the form of a 10-year subordinated, secured loan facility at Libor plus 8%.
Year end |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/13 |
0.0 |
(5.4) |
(6.6) |
0.0 |
N/A |
N/A |
12/14 |
2.7 |
(6.6) |
(7.8) |
0.0 |
N/A |
N/A |
12/15e |
3.7 |
(8.6) |
(7.4) |
0.0 |
N/A |
N/A |
12/16e |
0.0 |
(8.8) |
(3.6) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.
Consolidated Contractors Company (CCC)
CC Mining is the mining finance arm of Consolidated Contractors Company (CCC). CCC is a Lebanese group, historically focused on the oil & gas and general construction markets. Its construction function is headquartered in Athens and its lead negotiator, John Burgess, was formerly the managing director of ACC Rio Tinto Exploration (Arte) in India (inter alia). While originally a pure EPC contractor, CCC’s modus operandi is now to make equity investments associated with projects in which it is pre-engaged. In return for its investment, CCC will have the right to appoint one director to Euromax’s board and one Technical Committee member.
Further funding anticipated
In addition to its US$30m headline financing, Euromax also announced US$5m of further anticipated funding via the placing of a two-year, 12.5% convertible (convertible at C$0.40/share) to a company ‘insider’. Note that, for these purposes, the term insider should be seen in a Canadian context and interpreted to mean ‘existing shareholder’, rather than the UK meaning of the term.
Valuation: C$1.03/share
In our March outlook note, we increased our valuation of Euromax to C$1.08/share (based on the present value of the fully diluted potential dividend stream to Euromax investors discounted at 10% pa) to reflect the results of Euromax’s recently completed definitive feasibility study (DFS) on Ilovica. This month’s funding announcement implies the issue of up to 41.4m common shares in Euromax. However, this is already incorporated into our future debt and equity funding assumptions and therefore does not change our valuation, except for a slight reduction to C$1.03/share as a result of the effect of a weak US$ vs both C$ and the euro in the intervening time. In the meantime, we estimate that the Ilovica resource alone has a value in the range US$52.0-78.8m cf Euromax’s market capitalisation of c US$52m.
Exhibit 1: Financial summary
C$'000s |
2011 |
2012 |
2013 |
2014 |
2015e |
2016e |
||
December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
0 |
0 |
0 |
2,695 |
3,663 |
0 |
Cost of Sales |
0 |
0 |
0 |
(2,251) |
(3,018) |
0 |
||
Gross Profit |
0 |
0 |
0 |
444 |
645 |
0 |
||
EBITDA |
|
|
(2,521) |
(4,973) |
(5,276) |
(6,366) |
(7,944) |
(8,589) |
Operating Profit (before amort. and except.) |
(2,611) |
(5,056) |
(5,375) |
(6,492) |
(8,121) |
(8,766) |
||
Intangible Amortisation |
0 |
0 |
0 |
(21) |
(8) |
0 |
||
Exceptionals |
(40) |
59 |
(1,806) |
(4,186) |
(1,979) |
0 |
||
Other* |
(835) |
(428) |
(835) |
4 |
12 |
0 |
||
Operating Profit |
(3,485) |
(5,425) |
(8,015) |
(10,695) |
(10,096) |
(8,766) |
||
Net Interest |
0 |
0 |
(17) |
(127) |
(524) |
15 |
||
Profit Before Tax (norm) |
|
|
(2,611) |
(5,056) |
(5,392) |
(6,619) |
(8,645) |
(8,752) |
Profit Before Tax (FRS 3) |
|
|
(3,485) |
(5,425) |
(8,033) |
(10,822) |
(10,620) |
(8,752) |
Tax |
0 |
(33) |
(30) |
(25) |
(27) |
0 |
||
Profit After Tax (norm) |
(2,514) |
(4,947) |
(5,414) |
(6,640) |
(8,660) |
(8,752) |
||
Profit After Tax (FRS 3) |
(3,485) |
(5,458) |
(8,063) |
(10,847) |
(10,647) |
(8,752) |
||
Average Number of Shares Outstanding (m) |
48.0 |
63.4 |
82.6 |
85.3 |
116.8 |
245.4 |
||
EPS - normalised (c) |
|
|
(5.2) |
(7.8) |
(6.6) |
(7.8) |
(7.4) |
(3.6) |
EPS - normalised and fully diluted (c) |
|
(4.5) |
(6.7) |
(5.8) |
(5.7) |
(5.6) |
(3.1) |
|
EPS - (IFRS) (c) |
|
|
(7.3) |
(8.6) |
(9.8) |
(12.7) |
(9.1) |
(3.6) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||
EBITDA Margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||
Operating Margin (before GW and except.) (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
11,929 |
17,084 |
18,015 |
16,641 |
26,293 |
26,115 |
Intangible Assets |
0 |
0 |
29 |
430 |
422 |
422 |
||
Tangible Assets |
11,929 |
17,084 |
17,985 |
16,211 |
25,871 |
25,693 |
||
Investments |
0 |
0 |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
2,798 |
3,341 |
6,290 |
3,180 |
3,281 |
133,556 |
Stocks |
0 |
0 |
0 |
0 |
305 |
0 |
||
Debtors |
776 |
1,579 |
608 |
199 |
301 |
0 |
||
Cash |
2,022 |
1,762 |
1,335 |
2,110 |
1,804 |
132,685 |
||
Other |
0 |
0 |
4,346 |
871 |
871 |
871 |
||
Current Liabilities |
|
|
(530) |
(749) |
(1,208) |
(5,831) |
(7,790) |
(7,542) |
Creditors |
(530) |
(749) |
(1,208) |
(4,996) |
(6,955) |
(6,707) |
||
Short term borrowings |
0 |
0 |
0 |
(835) |
(835) |
(835) |
||
Long Term Liabilities |
|
|
0 |
0 |
0 |
0 |
(10,568) |
(21,135) |
Long term borrowings |
0 |
0 |
0 |
0 |
(10,568) |
(21,135) |
||
Other long term liabilities |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net Assets |
|
|
14,198 |
19,675 |
23,096 |
13,990 |
11,216 |
130,994 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
(1,966) |
(5,178) |
(4,496) |
(2,494) |
(6,904) |
(8,217) |
Net Interest |
0 |
0 |
(17) |
(18) |
0 |
0 |
||
Tax |
0 |
0 |
(35) |
(26) |
(27) |
0 |
||
Capex |
(5,245) |
(6,947) |
(5,047) |
(2,122) |
(11,816) |
0 |
||
Acquisitions/disposals |
0 |
1,468 |
1,041 |
3,023 |
0 |
0 |
||
Financing |
7,907 |
10,479 |
7,961 |
(74) |
7,874 |
128,530 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
696 |
(178) |
(594) |
(1,711) |
(10,873) |
120,313 |
||
Opening net debt/(cash)* |
|
|
(1,253) |
(2,022) |
(1,762) |
(1,406) |
(1,275) |
9,598 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
73 |
(83) |
167 |
1,580 |
0 |
0 |
||
Closing net debt/(cash)* |
|
|
(2,022) |
(1,762) |
(1,335) |
(1,275) |
9,598 |
(110,715) |
Source: Company sources, Edison Investment Research. Note: *Net debt/(cash) includes ‘restricted cash’ from FY14.
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