🕐25.05.12 - 10:27 Uhr

INVESTEC: KRYSO RESOURCES - SIGNIFICANT LEAP FORWARD IN FINANCING PAKRUT PROJECT - BUY



Kryso Resources (KYS.L) Investec Securities Price: GBP 26.6 | Target: GBP 42.0 | Rec: Buy Kryso Resources’ (KYS’s) largest shareholder, CNMIM, has agreed to provide a US$93.5m secured loan facility, thereby underpinning the bulk of the cUS$108m (plus working capital) required to develop the Pakrut project.

In addition, CNMIM intends to exercise the 73.3m warrants that it owns, thereby contributing a further US$24m in equity.

Together, these will provide KYS with sufficient financing to proceed with development of Pakrut and to meet all of 2012 capital requirements. ¢ China Nonferrous Metals International Mining Company is to provide a two tranche loan facility: a US$10m loan direct to KYS and an RMB530m (US$83.5m) facility that is to be disbursed by CNMIM as construction contracts are entered into. ¢ In addition, CNMIM intends to exercise the warrants that it owns at the 21p per share strike price, contributing a further cUS$24m and increasing CNMIM’s shareholding from c26% to c41%.

Since KYS’s place of central management and control is outside the UK, this does not trigger a takeover offer. ¢ We see this is a very good result for KYS in an otherwise challenging market.

Together, the debt and equity provide KYS with sufficient financing to proceed with development of Pakrut and should provide it with all of the project capital financing required for 2012, which we estimate to total US$70m, assuming KYS is able to immediately move ahead with the construction tenders.

¢ We have delayed our assumption of a production start-up from FY13 to FY14.

In addition, we have applied higher costs in our assumptions, reflecting the current inflationary environment.

While this has reduced our target price from 48p to 42p, it reflects more conservatism, while still suggesting attractive upside.

Maintain Buy.


To access the full note please click here Analyst: Louise Collinge To receive further information or change your Research Preferences please email: South Africa or United Kingdom IMPORTANT NOTICE: This communication forms part of an electronic communication sent to the intended recipient (or such persons authorised representative) for their sole use and is subject to important legal and regulatory restrictions, qualifications and disclaimers ("the disclaimer") that may be accessed and read by clicking on the following hyperlink:http://www.investec.co.uk/about-investec/what-we-do/investment-banking/investec-securities/company-research/morning-meeting-comments.html or copying the address into your Internet browsers address bar.

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