Vital Metals Ltd. (VML:ASX) raised AU$45 million (AU$45M) and obtained a no-interest CA$5M Canadian loan, securing a solid financial position until the start of commercial rare earth (RE) carbonate sales and, thus, cash flow, a catalyst expected in late 2022-early 2023, reported MST Access analyst Michael Bentley in an August 11, 2022 research note.
Currently, Vital Metals is commissioning its rare earth extraction facility in Saskatoon, Saskatchewan, to produce RE carbonate from ore mined at the company's Nechalacho rare earth oxide (REO) project in the Northwest Territories. The Australian firm aims to start ramping up throughput at this plant in Q4/22.
"The company is well funded against the backdrop of remaining development works at the Saskatoon extraction plant," Bentley wrote.
Bentley noted Vital Metals also is in the process of producing a 2.5-ton carbonate sample for its Norwegian offtake partner REEtec, which, earlier in 2022, agreed to provide RE metals to German electric drivetrain company Schaeffler for five years. Vital Metals expects to finish producing the 2.5 tons in October 2022.
The analyst described Vital Metals' recent capital infusions. The AU$45M capital raise was carried out at AU$0.04 per share, he wrote. An investment by Lionhead Resources, a mining-focused private equity firm headed by experienced mining operator and investor Richard Crookes, accounted for US$30M of the total. As a result, Lionhead earned two seats on Vital Metals' board.
"We see Lionhead's investment as very positive," Bentley commented. "Lionhead's long-term investment strategy aligns with Vital Metals' goal to become the lowest-cost producer of mixed REO (ex-China) by developing one of the highest-grade rare earth (RE) deposits in the world and the only RE project capable of beneficiation solely by ore sorting."
As for the CA$5M loan, Vital Metals got it from a regional economic development-focused governmental agency in Canada, noted Bentley. The mining company is to repay the monies over five years in monthly tranches, starting April 1, 2024.
"The receipt of the funding on such supportive terms from the Canadian government is a signal of the positive tone of the relations between the company and local authorities," wrote Bentley.
The analyst revised his valuation of Vital Metals to account for the added capital and increased share base. The result was a per-share valuation decrease to AU$0.18 from AU$0.21. Bentley added that the company's share price at the time, of around AU$0.046, does not reflect Nechalacho's underlying value, which he estimates at AU$0.03 per share in stage one and AU$0.13 in stage two. Plus, Nechalacho offers further upside, Bentley noted.
This is because "the scale of the resource and its location in Canada uniquely position Vital Metals to supply the market with light and heavy REs from outside China," wrote Bentley.
Vital Metals Ltd. is closed for trading at AU $0.046 on Friday, August 12, 2022.
| Want to be the first to know about interesting Critical Metals investment ideas? Sign up to receive the FREE Streetwise Reports' newsletter. | Subscribe |
Disclosures:
1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with: None. Please click here for more information.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.
Disclosures for MST Capital Markets, Vital Metals, Aug. 11, 2022
This report has been commissioned by Vital Metals Ltd. and prepared and issued by Michael Bentley of MST Access in consideration of a fee payable by Vital Metals Ltd. MST Access receives fees from the company referred to in this document, for research services and other financial services or advice we may provide to that company.
MST Financial also provides equity capital markets (“ECM”) and corporate advisory services through its capital markets division, MST Capital Markets (“MST Capital”). MST Capital provides these services to a range of companies including clients of the MST Access service. As such, MST Capital may in future provide ECM and/or corporate advisory services to the company that is the subject of this research report and, accordingly, may receive fees from the company for providing such services. The Company that is the subject of this report has, within the last 12 months, engaged MST Capital to provide ECM services, including acting as Joint Lead Manager for the August 2022 capital raising of approximately A$45 million for the subject company.
However, MST Financial has measures in place to ensure the independence of its research division is maintained, including information barriers between its Capital Markets and Research teams. In addition, neither MST Access, not any of its research analysts, receive any financial benefit that is based on the revenues generated by MST Capital Markets or any other division of MST Financial. The analyst has received assistance from the company in preparing this document. The company has provided the analyst with communication with senior management and information on the company and industry.
As part of due diligence, the analyst has independently and critically reviewed the assistance and information provided by the company to form the opinions expressed in the report. Diligent care has been taken by the analyst to maintain an honest and fair objectivity in writing this report and making the recommendation. Where MST Access has been commissioned to prepare content and receives fees for its preparation, please note that NO part of the fee, compensation or employee remuneration paid will either directly or indirectly impact the content provided. Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently certified. Opinions contained in this report represent those of MST Access at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results and estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.
Exclusion of liability: To the fullest extent allowed by law, MST Access shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained in this report. No guarantees or warranties regarding accuracy, completeness or fitness for purpose are provided by MST Access, and under no circumstances will any of MST Financials’ officers, representatives, associates or agents be liable for any loss or damage, whether direct, incidental or consequential, caused by reliance on or use of the content.
General Advice Warning: MST Access Research may not be construed as personal advice or recommendation. MST encourages investors to seek independent financial advice regarding the suitability of investments for their individual circumstances and recommends that investments be independently evaluated. Investments involve risks and the value of any investment or income may go down as well as up. Investors may not get back the full amount invested. Past performance is not indicative of future performance. Estimates of future performance are based on assumptions that may not be realised. If provided, and unless otherwise stated, the closing price provided is that of the primary exchange for the issuer’s securities or investments.
The information contained within MST Access Research is published solely for information purposes and is not a solicitation or offer to buy or sell any financial instrument or participate in any trading or investment strategy. Analysis contained within MST Access Research publications is based upon publicly available information and may include numerous assumptions. Investors should be aware that different assumptions can and do result in materially different results. MST Access Research is distributed only as may be permitted by law. It is not intended for distribution or use by any person or entity located in a jurisdiction where distribution, publication, availability or use would be prohibited. MST makes no claim that MST Access Research content may be lawfully viewed or accessed outside of Australia. Access to MST Access Research content may not be legal for certain persons and in certain jurisdictions. If you access this service or content from outside of Australia, you are responsible for compliance with the laws of your jurisdiction and/or the jurisdiction of the third party receiving such content. MST Access Research is provided to our clients through our proprietary research portal and distributed electronically by MST to its MST Access clients. Some MST Access Research products may also be made available to its clients via third party vendors or distributed through alternative electronic means as a convenience. Such alternative distribution methods are at MST’s discretion.
