Cornish Metals faces costly financing hurdle

Cornish Metals

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Cornish Metals (AIM: TIN) is seeking £135 million ($180 million) through a deeply discounted share sale to unlock financing for its South Crofty tin mine’s restart, warning it could be unable to pay its debts if the deal fails.

The proposed price of 60 pence is 41% below the last closing price before trading was paused last Wednesday. Proceeds would help rebuild the former tin mine near Camborne, about 390 km southwest of London, where Cornish has been targeting first production in mid-2028.

“There is no certainty that other funding would be available on suitable terms or indeed at all,” the company said Tuesday, outlining the consequences if shareholders reject the financing.

The equity sale would release $210 million of bond financing held in escrow, subject to other conditions. It puts a price on a funding problem that Cornish has disclosed for months: Shareholders face substantial dilution to advance the project, even with backing from Glencore (LSE: GLEN) and Britain’s National Wealth Fund.

Glencore has conditionally agreed to invest £11.2 million and signed an agreement to buy all South Crofty’s tin concentrate for six years from commercial production. Vision Blue Resources, the National Wealth Fund and Cornish directors together controlling about 58% of existing shares have committed to support the financing vote.

Earlier warnings

Cornish explicitly identified material uncertainties that could cast significant doubt on its ability to continue as a going concern in annual results released April 2. The company said further financing was necessary to develop South Crofty through to production.

Its Sept. 24 interim results release repeated the warning, reporting no revenue and short-term liabilities exceeding short-term assets. Continued operations depended on additional financing, including the equity needed to release the bond proceeds.

Management’s financing timetable has also slipped. When announcing the bond deal on May 7, CEO Don Turvey said Cornish expected to be fully funded and announce a final investment decision during the summer months. Tuesday’s proposal instead anticipates a shareholder meeting around Nov. 9.

Cornish must complete an equity raise of at least US$161 million by Nov. 21 to satisfy a condition for releasing the bond proceeds, unless bondholders extend the deadline. The proposed sale would exceed that threshold.

If shareholders reject it, Cornish warned it would probably fail to meet the bond condition and couldn’t meet debts as they come due or continue operating as it does now.

Shareholder cost

At the proposed price, a £135-million raise would require roughly 225 million new shares, compared with about 125.5 million already outstanding, before other issuances. Existing investors who don’t participate would see their proportionate ownership fall substantially.

Trading remains paused under AIM’s Capital Access Window rule.

The financing isn’t underwritten. It comprises institutional, direct and retail subscriptions, with completion dependent on shareholder approval and other conditions.

Cornish’s funding plan allocates £185 million to project capital spending, £55 million to converting existing shareholder loans and accrued interest into equity and £32 million to bond interest during construction and the production ramp-up. The six-year bonds carry annual interest of 13.5%.

Mine progress

South Crofty closed in 1998 and Cornish acquired the project in 2016. Its development plan envisages about 49,000 tonnes of tin in concentrate over 14 years, with output averaging roughly 4,700 tonnes annually during years two through six.

Physical work continues. Dewatering had reached more than 400 metres below surface by an Oct. 12 update, while processing plant excavation was substantially complete and civil works had begun. Shaft refurbishment and dewatering are scheduled to reach about 730 metres below surface in the first half of next year.

Cornish still requires certain planning and environmental consents, approvals and amendments before production, Tuesday’s release said.