The Company has also signed a term sheet setting out the proposed terms on which the Castlelake Funds and other market participants (subject to the satisfaction of agreed conditions) provide up to US$40 million in equity and up to US$40 million from the issue of senior secured loan notes (‘Senior Funding Package’).

Graphex Mining managing director Phil Hoskins said: “We are pleased to have agreed this financing transaction, which represents a major milestone for our Company. We can now proceed with completion of the bankable feasibility study (BFS) with a view to Graphex becoming a leading supplier of premium, coarse flake graphite.

“We take great confidence from the commitment of a global private investment firm, which follows a period of extensive due diligence. We believe this transaction affirms the quality of the Chilalo project, the premium product it will produce, the graphite market opportunity identified by the Company and confidence in the Company’s ability to reach a satisfactory resolution in Tanzania.”

Proceeds from the Interim Loan Notes are to be used to advance the project to be able to satisfy the conditions precedent to the Senior Funding Package. The more material conditions, in addition to customary conditions precedent, that need to be satisfied for the Senior Funding Package include:

  • Entry into definitive transaction documents – the term sheet for the Senior Funding Package is to be converted into transaction documents;
  • Completion of a BFS;
  • Certain Castlelake approvals and completion of ongoing Castlelake due diligence to its satisfaction;
  • Resolution of issues relating to Tanzania’s mining legislation – a detailed submission has been provided to the Tanzanian Government and Graphex expects to present the submission to Government officials in the near future; and
  • Execution of material contracts including off-take, mining and EPC amongst others.

Satisfaction of these conditions (and other customary conditions), are required to proceed with the Senior Funding Package, allowing the commencement of mine construction and providing a pathway to production.

The final financing amount for the Senior Funding Package will be determined by the BFS and is expected to fund all associated costs and allowances typical for the construction of a mining project.

If the conditions to the Senior Funding Package are not satisfied within two years, the amount outstanding under the Interim Loan Notes becomes immediately payable. If the Senior Funding Package conditions are satisfied, the Interim Loan Notes can be capitalised into the Senior Funding Package or repaid in cash.

The term sheet calls for no more than 50% of the Senior Funding Package to be provided by way of secured loan notes (i.e. the debt to equity ratio will not exceed 50/50).

When all the conditions to the Senior Funding Package have been satisfied, the Company, subject to shareholder approval, will go to market for an equity raising and depending on market conditions target to limit the Castlelake Funds to 40% of the total issued share capital.

The pricing of the equity raising is detailed in Appendix A, however is subject to a ceiling price of $0.28 per share. The Company intends to provide existing shareholders with an opportunity to participate in the equity raising on the same terms as the Castlelake Funds.

Key terms and conditions of the Interim Loan Notes and the Senior Funding Package are set out in Appendix A to this announcement.

Graphex is being advised by Azure Capital as financial adviser and King & Wood Mallesons as legal adviser.

The Chilalo Mining Licence was granted in February 2017 and is valid and in good standing. With other key approvals in place, satisfaction of the conditions to the Senior Funding Package will see Chilalo strongly positioned for development.

Source: Company Press Release