Leigh Creek Energy: Fully Capitalised For Pre-Commercial Demo
Edison | May 23, 2017 01:50AM ET
On 31 March 2017, Leigh Creek Energy Ltd (AX:LCK) announced that it had raised A$21.85m of new equity; net proceeds are to be used to fund the company’s pre-commercial ISG demonstration project. A new cornerstone investor has also been added to LCK’s shareholder register, China New Energy, a Hong Kong-based company with a mix of assets in China including steel mills, gas fired power stations and coal mines. Our RENAV falls from $0.31/share to $0.26/share to reflect the equity dilution but importantly, the new funding provides visibility on the upcoming demonstration project which has the potential to significantly de-risk LCK’s flagship project. We continue to risk our valuation with a subjective 20% chance of commercial success – we expect to revise this risking on completion of the demonstration project.
China New Energy strategic investment
China New Energy’s (CNE) investment in LCK comes in the form of three tranches: the first (A$4.1m) was settled in Q117, the second (A$3.4m) settled in May 2017 and the third (A$12.5m) is to be issued, subject to shareholder approval, no later than eight weeks after tranche two. On completion of tranche three, CNE will hold 32.78% of the company’s equity and after tranche two will have a right to a seat on the board. Despite the NAV/share dilution, we believe CNE brings much needed capital and power generation expertise to the group enabling LCK to progress the Leigh Creek Energy Project (LCEP) through demonstration in late 2017 / early 2018.
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Leigh Creek Energy - Fully Capitalised For Pre-Commercial Demo
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