Ground Breakers: Azure raises big cash, New Hope breaks earnings record, 29Metals flags Capricorn impairment
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It’s the belle of the ball, the lithium stock everyone desires right now.
And instos are going to be jostling like Taiwanese politicians for a place at the table as Azure Minerals (ASX:AZS) launches a $120 million placement and $10 million share purchase plan to ramp up drilling at its Andover lithium discovery.
The massive Pilbara find has seen Azure shares surge almost 1150% YTD, taking the one time nickel minnow to a market cap of around $1.1 billion.
It also gives the company a little bit of breathing room after facing a rejected $2.31 a share bid from its major shareholder, Chilean lithium giant SQM.
SQM and the private investment vehicle of billionaire prospector Mark Creasy, who owns 40% of the Andover project, have also agreed to maintain their respective 19.98% and 13.37% shareholdings as part of the Barrenjoey and Canaccord Genuity led placement.
Along with an already announced 100,000m drilling program, intended to define a maiden mineral resource by the March quarter of next year, the funds will also be put towards base metals exploration, geophysics and scoping, heritage and environmental studies.
That resource could be as much as 100-240Mt at a grade of 1-1.5% Li2O, if a recent exploration target is to be believed.
“Azure is delighted to announce the underwritten institutional Placement, which provides a strong capital base to accelerate exploration and resource drilling at Andover as we advance towards announcing a maiden lithium Mineral Resources targeted in Q1 2024,” Azure MD Tony Rovira said.
“Additionally, the Placement provides sufficient funding to progress various studies at Andover, including a Scoping Study which is expected be finalised in 2024.
“The Placement provides a strong endorsement for Andover as one of the best lithium exploration projects globally, with abundant outcropping mineralised pegmatites and substantial widths of high-grade mineralisation intersected from limited drilling to date.
“The Company remains incredibly optimistic about the potential scale of Andover and looks forward to realising the full potential of this exciting discovery.”
The placement will be conducted at $2.40 per share, a discount to its $2.74 price on Friday, but crucially above the last SQM offer.
Coal miners are basking in the afterglow of their annus mirabilis, with New Hope Group (ASX:NHC) the latest to boast record earnings, seeing $1.75 billion of underlying earnings flow into its coffers in the 2023 financial year.
It comes after Whitehaven Coal (ASX:WHC) revealed it had built a $2.65 billion cash pile on the back of last year’s record run in thermal coal prices, while Yancoal (ASX:YAL) will pay out $489 million in dividends as the Sydney real estate level prices coal miners received in the latter part of 2022 and early 2023 flowed through to their results.
New Hope generated $267.7m in underlying EBITDA in the July quarter on sales from its Bengalla mine in the Hunter Valley of 2.11Mt, similar to the April quarter and within guidance at 7.6Mt for FY23.
It also begun operations at the hotly contested extension of the New Acland coal ops in Queensland, moving 1.3Mbcm of waste since May 1.
New Hope’s coal sold for an average realised price of $346.7/t across the 2023 financial year, up from $281.8/t a year earlier, bankrolling a $1.5248b cash generation that left $730.7m in its currently well stocked bank account after spending $192.4m buying back shares from investors.
Market prices for thermal coal have receded across the year, with the globalCoal Newcastle index for high CV falling 26% QoQ and 65% YoY to US$142.4/t on average over the July quarter.
However, New Hope believes it has stabilised after crashing on a mild northern hemisphere winter.
“While there was a decline in price at the beginning of the quarter, the market price did stabilise during the second half of the quarter with high energy coals finding gains in July, finishing with an average monthly gC NEWC price of US$134.7,” the company said.
“Robust demand from China for lower energy coals continued to provide support for pricing and a clearing house for short-term spot sales. Market sentiment remains positive with market forwards continuing to show a contango into the end of calendar year 2023.”
Unfortunately it’s not such great news for shareholders of 29Metals (ASX:29M), which is poised to book a non cash impairment of between $180-210m on the carrying value of its Capricorn copper mine in Queensland.
29Metals has enjoyed the sort of luck that would normally befall a Coen Brothers protagonist since its Capricorn mine flooded in a once in a lifetime event earlier this year, only recently returning to operation.
The EMR Capital backed miner said insurers had confirmed their indemnity for damage to surface property at Capricorn and associated business interruption, making an initial unallocated progress payment of $24m while an assessment of the damages continues.
However insurers have said their policy does not respond to underground loss and damage.
“Further information has been requested,” the company said in a statement. “29Metals does not agree with the insurers’ position regarding coverage of the underground loss and will continue to work with insurers in relation to the further information required to advance this claim.”
29M reports its half-year financials on August 30.
At Stockhead, we tell it like it is. While Azure Minerals is a Stockhead advertiser, it did not sponsor this article.