Winmar boards the cobalt train with AVZ’s Congo advisor; shares soar 150pc
Investors piled into Winmar Resources after the explorer raised $3.1 million to buy cobalt in the Congo and unveiled a new strategic advisor.
The shares (ASX:WFE) closed up 150 per cent at 1.5c on Tuesday — a four-year high — with just over a third of its shares changing hands.
Winmar appointed Singapore-based Airguide as a corporate advisor. Airguide has performed the same role in the Democratic Republic of Congo (DRC) for popular lithium miner AVZ Minerals (ASX:AVZ).
Winmar raised $3.1 million in two private placements to build a war chest for acquisitions most likely to be in the DRC.
Airguide and its principals put in a combined $1.5 million.
Trading on a hot reputation
Airguide, run by Michael Langford and David Robinson, will help Winmar to make deals for its prospective cobalt operations particularly in China.
The announcements were held up on Tuesday morning as the ASX asked for more details around how Airguide would be paid. It also wanted an assurance that a deal was not already in the offing.
Airguide will be paid in 100 million performance rights based on market cap targets. The first involves lifting the market cap from $12 million to $30 million. The final target is a $100 million market cap.
Winmar said the private placements, while diluting existing shareholders by 21 per cent, were at a price (0.5c) five times higher than the rights issue in October.
Until now Winmar was focused on a Canadian silver-cobalt project and its 70 per cent interest in an iron ore mining lease in Western Australia.
Winmar pulled out of a joint venture with Kimberley Diamonds last year and slashed its costs as it cast around for a new project.
By December it had struck a deal to acquire rights to 2240 hectares of mining claims in the historic high-grade Cobalt-Gowganda silver-cobalt mining district of eastern Ontario in Canada.
Winmar says this district is one of the most prospective for cobalt outside the DRC.
Indeed, it has become a focus for other cobalt-focused companies such as unlisted Battery Mineral Resources and dual-listed First Cobalt (TSXV/ASX:FCC).
Cobalt, so hot right now
Winmar is just one of 55 cobalt small and mid caps monitored by Stockhead, and is one of 31 that has seen its share price rise over the last 12 months.
Since Winmar’s first foray into cobalt in December last year, its share price is up 275 per cent.
Cobalt is a key ingredient in lithium-ion batteries.
Bloomberg New Energy Finance estimates electric cars will account for 2 per cent of the market by 2020, rising to 8 per cent by 2025 and 20 per cent by 2030.
Heres a list of ASX-listed stocks with exposure to cobalt:
To DRC or not to DRC
The DRC however has split investors, with some saying it’s the best cobalt location in the world and others eyeing its political problems with caution.
Julian Babarczy of Regal Funds Management says the DRC has the best cobalt geology globally and represents the vast bulk of current global production.
But issues such as political risk and poor mining practices, including child labour, mean that end users of cobalt are seeking supply sources from outside the DRC.
“DRC located cobalt assets will generally trade at a discount to non-DRC located cobalt assets to reflect the lower perceived risk,” he told Stockhead.
Statements from the government that it might increase taxes on cobalt production could reduce the economic benefits for DRC mining companies.
“As the bulk of cobalt currently comes from the DRC, it also means that the cost curve will structurally shift higher, which helps support economics on higher cost non DRC cobalt mines.”
Winmar managing director Rod Sainty says Jason Brewer, appointed as chairman in November, had initially introduced the DRC as a possible location.
“I was initially skeptical, I will be honest. Is this a place we want to take Winmar? We’re taking cautious first steps and the reports that we’re receiving to date are encouraging. We are gaining confidence that we will be able to find and secure an exciting resource project in this region which is rich in existing mines and infrastructure”, he told Stockhead.
But he also says that even with the tax increase the DRC would still be a low tax environment compared to other countries.
“From our understanding the political situation is stable enough that [the DRC] demands our attention,” he said.
“We see value in a two pronged attack in both Canada and the Congo, which will diversify our cobalt assets across two different geographic and political environments.”