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Superior Lake Resources - $5 million capital-raising as study nears completion

Aug 2018


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Summary - $5 million capital-raising as study nears completion

Superior Lake Resources (ASX:SUP) has released an announcement on funding and the progress of its restart study for the Superior Lake zinc project (‘the Project’) in Ontario, Canada.  Highlights of the announcement include the following.

  • Above-market placement raises $5 million (6% premium to closing share price).
  • Tribeca Investment Partners appointed to act as arranger for a project finance facility of up to US$60 million.
  • The restart study remains on track for completion during Q3 2018.

Analyst comments: This announcement from Superior Lake is strong on a number of fronts.

Firstly, the $5 million equity placement should see the company fully funded through to the end of the feasibility study, due for completion by mid next year. Moreover, it mitigates the market’s concern over short-term funding requirements, a major reason for the recent lag in the share price despite the strong on-going news flow.

Secondly, the appointment of Tribeca Investment Partners to arrange financing of up to US$60 million for future redevelopment is reassuring, given the stage of Project development at present. In fact, it’s uncommon for mining ventures to attract this level of support prior to the release of an initial development study. It signals not only Tribeca’s faith in the undertaking long term but also Superior Lake’s intent to rapidly advance development of the Project.

Finally, Superior Lake has again confirmed that the restart study is imminent. We expect positive results given the significant infrastructure that can be utilised, which reduces capital costs. Operating costs should also be relatively low, given the exceptionally high-grade ore.

We maintain our assessment of Superior Lake as a SPECULATIVE BUY.  That rating will be reviewed following the release of the restart study, at which time we will also provide initial valuation guidance.