Agritech

New funding puts Centrex Metals on-track for full-scale production at its Qld phosphorite project in 2023

Mon 04 Apr 22, 3:37pm (AEST)
Phosphate

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Key Points

  • The company plans to begin production at its Ardmore trial plant in August
  • At 14¢ a share, the placement was priced at a 33.3% discount to the last traded price
  • Centrex has as of today an offtake agreement with Ravensdown

Centrex Metals (ASX: CXM) entered a trading halt this morning pending the release of an announcement on Wednesday, at which time the company’s shares are expected to resume trading.

Following the signing of a third offtake agreement for the company’s flagship rock phosphate project at Ardmore in Qld, the mineral explorer is securing $16m - split evenly between a placement and entitlement offer.

Full-scale production

The company plans to begin production at its Ardmore trial plant in August at 240,000 tonnes per year of rock phosphate, which is used in fertilisers.

Subject to a final investment decision (FID) on full-scale production by the end of 2022, Centrex plans to construct the plant next year and ramp-up full-scale production late in 2023.

It’s understood that Ardmore’s definitive feasibility study (DFS) was modelled on $US125 per tonne while the current benchmark spot pricing was at $US173.

The DFS’s pre-tax net present value (NPV) was $207m while the internal rate of return (IRR) was 52%.

Funding deal

At 14¢ a share, the placement was priced at a 33.3% discount to the last traded price and an 11.8% discount to the 15-day volume weighted average price.

Then there was the entitlement offer which was made on a 5:42 non-renounceable basis.

Prospective investors have been assured that the offer has experienced strong pre-launch institutional investor support.

Mine life & offtake agreements

Management have guided to a 10-year mine life for Ardmore, with 10.1m tonnes reserve at 30.2%.

Adding to Southern Cross Fertiliser, and Samsung deals, Centrex also has [as of today] an offtake agreement with Ravensdown, an agricultural cooperative company that manufactures and markets agricultural inputs and services throughout NZ.

Centrex's 100% owned subsidiary Agriflex today executed an agreement with Ravensdown for a 5,000 wet tonnes beneficiated phosphate rock trial shipment and a first right of refusal to purchase 20% of the Ardmore mine’s annual production for the first three years.

Commenting on the agreement with Ravensdown, Centrex’s managing director Robert Mencel said:

“With the signing of this agreement, the Ardmore Project has 70% of its first three years of production allocated to first class customers”.

Consensus does not cover this stock.

Based on Morningstar's fair value of $0.31, the stock appears to be undervalued.

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The Centrex share price has been on a tear over the past three months.

 

Written By

Mark Story

Editor

Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

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