Ryzon Converts $8.5M Debt to Equity, Secures $7M More for Nachu Project

Engineering Progress and Funding Developments

Ryzon Materials Ltd (ASX – RYZ) has reported meaningful advancement in the detailed engineering phase of its Nachu Graphite Project in Tanzania. The engineering work, conducted by Xinhai Mining Research & Design Co., Ltd, covers comprehensive plant design elements including flow charts, equipment layouts, piping, and civil works. Notably, Xinhai has agreed to fund this $3.5 million engineering contract through an equity subscription, issuing shares and options to Ryzon, subject to shareholder approval.

Alongside this, early preparatory works are set to commence, including an updated Environmental Impact Study reflecting the new plant scale, water infrastructure upgrades, and initial earthworks. These steps are critical to advancing the project towards construction readiness.

Debt Conversion and Financial Support

Financially, Ryzon has secured a pivotal agreement with its secured lender to convert the outstanding debt, recently increased from $8.328 million to $8.497 million, into equity. This conversion involves issuing over 339 million shares and nearly 170 million options, again pending shareholder approval and ASX re-quotation. Additionally, F.X Funds Management Pty Ltd, the new trustee for the secured debt fund, has committed to providing up to $7 million in further funding over the next 12 months to support ongoing operations and working capital needs.

Corporate and Regulatory Challenges

Despite these positive steps, Ryzon’s shares remain suspended on the ASX since December 2023 due to concerns over compliance with continuous disclosure and other listing rules. The ASX has classified Ryzon as a long-term suspended entity, requiring the company to demonstrate robust disclosure arrangements and operational sufficiency before reinstatement can be considered. The company is refocusing its strategy squarely on the Nachu Graphite Project as its primary asset, moving away from its previous investment in Imperium3, which appears unlikely to yield returns.

Legal headwinds persist with ongoing claims from Ramboll Americas Integrated Solutions, Inc. related to services for the Imperium3 battery factory, and pre-trial activities concerning an ASIC claim. Ryzon intends to defend these claims vigorously.

Financial Position and Outlook

Ryzon’s quarterly cash flow report reveals operating cash outflows of $672,000 and a modest cash balance of $98,000 at quarter-end. However, with the committed $7 million financing facility, the company estimates it has sufficient funding to cover approximately 10.5 quarters of operations at current expenditure levels. This financial runway provides some breathing room as the company navigates its complex regulatory and operational landscape.

Looking ahead, the upcoming Annual General Meeting scheduled for late November will be a critical event where shareholder approval for the equity issuances will be sought, potentially reshaping the company’s capital structure and enabling further project development.