Australian metals and mining sector company, Aspire Mining Limited (ASX: AKM) is focussed on advancement of first stage, the Ovoot Early Development Plan (OEDP), of its flagship world-class and premium coking coal asset-the Ovoot Coking Coal Project (100%-owned) located in the Orkhon-Selenge Coal Basin in northern Mongolia.
The company aims to deliver increasing shareholder returns while contributing to the social and economic well-being and upliftment of local communities.
Shareholders are the owners of a company and play a crucial role, indirectly through the stock market, in the financing, operations, governance and control aspects of a business. A shareholder’s most straightforward job is to provide funds. Investors like to invest in companies that consistently beat earnings expectations and therefore, the company management is usually under presssure to be at par with the sales and profit projections. Specifically, shareholders of companies having significant free cash flow often create pressure to companies to pay out this surplus in the form of dividends or share buybacks to shareholders.
The market cap of Aspire Mining stands at around AUD 46.57 million with approximately 3.33 billion shares outstanding. The AKM stock closed at AUD 0.013 on 29 November 2019. AKM has also generated 5-day positive returns of 8.33% respectively.
The company’s Shareholder Composition is illustrated in the figure below-
However, in line with pursuing early production of washed coking coal under the OEDP, Aspire Mining has been exploring options to procure optimal funds for project financing with discussions ongoing with major shareholder Mr Tserenpuntsag. Preliminary interest has also been received by some specialist financiers for the provision of debt funding for mine, wash plant and road.
Placement to Major Shareholder Mr. Tserenpuntsag
A Share Subscription Deed had been reached by Aspire Mining with its key shareholder Mr Tserenpuntsag Tserendamba, for raising ~ $ 33.5 million (before costs) to fast track OEDP delivery.
Key features of this proposed placement include-
- Issue of 1,595,900,000 ordinary fully paid shares at AUD 0.021 each, representing a premium of 40% to the closing price of AUD 0.015 on 4 September 2019 and 27.7% to the 30-day (to 4 September 2019) VWAP of AUD 0.01645 per Aspire Mining share.
- Increase in Mr. Tserenpuntsag’s ownership in Aspire Mining from 27.5% to 51.0%.
Around $100 million in debt or project financing concerning the OEDP in the future is also assured by Mr Tserenpuntsag as further assistance. He also assured that the interest of minority shareholders, during the transition period, will be taken care of as there will be no board changes for the first six months after placement and all shareholders will have equivalent opportunity to apply for new equity issues that may take place anytime during next 12 months, post placement.
Later on 13 November 2019, Aspire Mining received further commitments from Mr Tserenpuntsag, as part of the proposed $ 33.5 million equity investment, that he would also exercise his 53.3 million listed options (Expiry Date: 11 December 2019) in Aspire Mining at 1.8 cents each, which is 50% above the ongoing Aspire Mining share price of 1.2 cents and strongly validates the financial support being provided by Mr Tserenpuntsag at a critical time period when the company is targeting near-term production of fat” coking coal and completing the Definitive Feasibility Study (DFS).
Mr Tserenpuntsag stake and AKM Shareholding after Placement
Once the placement is completed and options are exercise, Mr Tserenpuntsag’s interest in Aspire Mining would be 52.5%, given no other shareholders exercise their options.
Given the viability of this placement and requirement for funds, Aspire Directors are unanimously recommending that shareholders support the placement to Mr Tserenpuntsag in the absence of a superior proposal.
Mr Tserenpuntsag also stated that he would ensure maintenance of the Board structure including five Directors with two Directors nominated by him. Additional commitments are also there to protect the interest and representation of minority shareholders.
This proposed offer is now subject to shareholder approving the same at Aspire Mining’s Annual General Meeting to be held on 29 November 2019.
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