We have EMED Mining as a Trading Buy, the position being entered at 9p on the 24 Aug. The stock has been covered extensively in our magazine and on the blog (tabs to the right) with the most recent commentary from our contributor Zak Mir who suggested the stock might be ripe for a squeeze higher – https://www.spreadbetmagazine.com/blog/2012/10/3/new-regular-blog-feature-by-zak-mir-starting-with-2-big-stoc.html.
Prescient analysis by Zak with the shares up 20% at the open today on the announcement of a funding package for the development of their copper mine in Southern Spain that was purchased from Rio Tinto.
The terms of the deal involve the issuing of $15m of shares at a price of 14.8p – a near 50% premium to yesterdays share price (there’s a novelty in the current climate of heavily discounted placings and rights) and an additional loan facility of $35m. The company will, in exchange, grant to its partner in the project – Red Kite- the “off take” rights of upto 27% of the mined copper.
Here are the highlights –
The Subscription will be in two separate tranches with 50,000,000 Ordinary Shares being subscribed for in the first tranche and 13,829,787 in the second tranche. Both tranches will be conditional upon the approval by the Toronto Stock Exchange (“TSX”) and admission to trading on AIM of the relevant tranche (“Admission”). The subscription for the Second Tranche Shares (as defined below) is also conditional upon approval by the shareholders of the Company (the “Shareholders”) at the extraordinary general meeting of the Company to be held in December 2012 (the “EGM”). Notice convening the EGM will be despatched by the Company to Shareholders shortly.
The Standby Loan Facility is subject to the satisfaction of certain conditions including the parties negotiating and entering into definitive documentation for the facility and inter-creditor agreements on or before 31 December 2013 and the Company obtaining all consents required to give effect to the agreed security and ranking provisions.
The Company’s subsidiary, EMED Marketing Limited (“EMED Marketing”) has granted Red Kite Off-take Rights to purchase 27% of the copper production from the Rio Tinto Copper Project based on its current reported life of mine existing reserves. The granting of the Off-take Rights is conditional upon the first tranche of the Subscription (but not the second tranche) completing by 27 November 2012 (or such later date as the parties may agree). In the event that: (i) definitive documentation in respect of the Standby Loan Facility is not entered into by 31 December 2013; (ii) the Company notifies Red Kite that it no longer requires the Standby Loan Facility; or (iii) following execution of definitive documentation for the Standby Loan Facility, Red Kite fails to make an advance in accordance with the terms of such documentation, Red Kite’s entitlement automatically reduces from 27% to 13.5% of the copper production. The Off-take Rights have been structured such that copper concentrate produced at the Rio Tinto Copper Project is to be purchased by Red Kite at future market based prices.
Red Kite is a major international commodities group and will complement the Company’s existing strong shareholder base dominated by European, North American and Australian global mining investment institutions, to support the Company’s long term plans for production and development at the Rio Tinto Copper Project, starting with redevelopment of the current reserves at the Cerro Colorado Open Pit.
Any weakness in the stock is an additional accumulation opportunity in our opinion.