Polymetals Resources has halved its US$20 million debt facility and raised A$15 million in equity to support the Endeavor Mine's transition to steady production.
- US$20 million debt facility reduced to US$10 million
- A$15 million equity placement at $0.80 per share to replace undrawn debt
- Endeavor Mine progressing toward steady state with silver-lead and zinc concentrates stockpiled
- Ocean Partners to make first pre-payment under offtake agreement
- Equity raise priced at a slight premium to recent trading levels
Debt Facility Reduction and Equity Raise
Polymetals Resources Ltd (ASX, POL) has announced a significant reshaping of its capital structure as it advances the Endeavor silver-zinc mine toward steady state production. The company has agreed with its financier, Ocean Partners, to reduce its previously secured US$20 million debt facility to US$10 million. This adjustment comes after Polymetals was unable to obtain additional security releases from existing holders, a condition necessary to access the full debt amount.
To compensate for the undrawn US$10 million tranche, Polymetals is raising A$15 million through an equity placement priced at $0.80 per share. This move ensures the company maintains sufficient working capital during the critical ramp-up phase of the Endeavor Mine.
Operational Progress at Endeavor Mine
The Endeavor Mine, located in New South Wales’ prolific Cobar Basin, is transitioning from construction and commissioning into production. Polymetals has begun stockpiling silver-lead and zinc concentrates, signaling progress toward steady state operations. Under the terms of the offtake agreement, Ocean Partners is set to make its first pre-payment for concentrates produced during mill commissioning, providing an additional cash inflow.
Executive Chairman Dave Sproule expressed optimism about the mine’s trajectory, highlighting the combined support from Ocean Partners and shareholders. He emphasized that the equity raise and pre-payment funds position Polymetals well to achieve a long-term, profitable operation, with potential upside from ongoing exploration and metallurgical research.
Market and Shareholder Implications
The equity placement was conducted at a modest premium to recent trading prices, reflecting investor confidence in the company’s near-term prospects. With 18.75 million new shares to be issued, the total shares on issue will rise to approximately 267.8 million. The placement is expected to settle by mid-July, with new shares commencing trading shortly thereafter.
This capital restructuring reduces Polymetals’ reliance on debt, potentially lowering financial risk as the company navigates the complexities of ramping up production. However, it also dilutes existing shareholders, a trade-off that management appears to have balanced carefully given the pricing and timing.
Looking Ahead
Polymetals’ ability to sustain momentum at Endeavor will be closely watched by investors and analysts alike. The company’s forward-looking statements underscore inherent uncertainties, but the recent funding actions provide a clearer runway for operational progress. The coming months will be pivotal in validating the mine’s production model and the company’s strategy for growth.
Bottom Line?
Polymetals’ strategic capital reshuffle sets the stage for Endeavor’s production ramp-up, but execution risks remain.
Questions in the middle?
- Will Polymetals secure additional security to restore the full US$20 million debt facility?
- How quickly can Endeavor Mine achieve steady state production and generate positive cash flow?
- What impact will the equity dilution have on shareholder value in the medium term?