Centrex Launches $10.4M Entitlement Offer to Secure Future Amid Debt Forbearance

Background and Offer Details

Centrex Limited (ASX: CXM), an Australian phosphate mining company, has launched a pro-rata, non-renounceable entitlement offer to raise approximately $10.4 million. Eligible shareholders are invited to subscribe for one new share for every share held as of the record date, priced at $0.012 per share. Additionally, for every two new shares subscribed, investors will receive one free attaching option exercisable at $0.02 each before 31 March 2026.

The offer comprises three components: a Priority Offer to existing shareholders, a Shortfall Offer for any unsubscribed shares, and a Public Offer to both eligible shareholders and new investors. The company has set a minimum subscription threshold of $9 million, below which the offer will not proceed.

Context: Financial Restructuring and Operational Challenges

Centrex’s shares have been suspended from trading since December 2024 following operational and financial challenges. The company has entered into forbearance agreements with its key logistics provider, Aurizon Operations Ltd, and lender, National Australia Bank (NAB), to defer and restructure accumulated debts totaling over $21 million combined.

These agreements provide a temporary reprieve until January 2026, conditional on Centrex meeting specific undertakings, including completing this capital raising and securing further financing. Failure to comply could result in immediate debt repayment demands, suspension of logistics services, or enforcement of security interests, threatening the company’s viability.

Use of Funds and Strategic Priorities

The proceeds from the entitlement offer will be allocated primarily towards upgrading the Ardmore mine’s processing plant ($4.25 million), constructing a tailing facility ($1.19 million), expanding workshops and camp facilities ($0.69 million), and covering working capital needs ($3.51 million). Approximately $0.76 million is budgeted for offer-related expenses.

The directors emphasize that if the full amount is not raised, expenditure will be scaled back proportionally. The capital injection is intended to support operational ramp-up, improve shipment volumes, and stabilize the company’s financial position.

Risks and Investor Considerations

Investors should note the highly speculative nature of this investment. Centrex reported a net loss of $19.32 million for the 2024 financial year and currently faces significant liquidity constraints. The company’s ability to continue as a going concern hinges on the successful completion of this offer and ongoing operational improvements.

Key risks include potential default under debt arrangements, reliance on third-party contractors and logistics providers, transport infrastructure vulnerabilities, commodity price fluctuations, and regulatory uncertainties. The forbearance agreements impose strict covenants and repayment plans that Centrex must adhere to, adding further pressure.

Outlook and Market Implications

Centrex’s entitlement offer represents a pivotal moment in its financial restructuring. The capital raise, combined with the support from Aurizon and NAB, aims to provide the company with sufficient runway to execute its operational plans and improve shipment volumes from the Ardmore phosphate mine.

However, the offer is not underwritten, and failure to meet the minimum subscription could force Centrex to consider asset sales, further capital initiatives, or even cessation of mining activities. Shareholders face dilution risks if they do not participate fully, as the share count could nearly double post-offer.