Strategic Graphite seeks to raise $40m

The company is seeking a compliance listing on the ASX and is looking for financing from Singapore and UK funds.

Strategic Graphite Ltd plans to raise as much as $40 million in a share sale and an off take financing as it restarts production and seeks funds for a new plant at its South Australian graphite mine, discovered in the 1800s.

The company, which will change its name to Valence Industries Ltd, will seek a compliance listing on the ASX that will involve transferring its shares to a publicly listed register.

Under Strategic Graphite’s equity raising plan, 3,600 of its current shareholders will be offered two new shares in the company for every five in a deal worth between $7.5 million and $10 million. The stock will be listed on the ASX on Dec 13. A prospectus will be issued later this week.

Patersons Securities is the manager of the share sale whose funds will be used to restart production at the Uley mine, 23 kilometres from Port Lincoln. The mine has about 7,400 tonnes of graphite stock after it was put on care and maintenance 10 years ago.

Current equipment could ramp up graphite production to 10,000 tonnes per annum but the company’s chief executive Christopher Darby told DataRoom he wants to fund a brand new plant, through an off take financing plan, which could produce as much as 60,000 tonnes a year.

Such a production rate may generate annual revenue of about $75 million for the company, says Darby.

The off take financing agreement will involve the forward sale of graphite in return for as much as $30 million from investment funds in Singapore and the UK. The company will also pay the funds a market equivalent rate of interest. Darby declined to name the funds.

He hopes to wrap up the financing by the middle of 2014 and then begin construction of a new plant.

It will take two to three months to get the old plant operational again. About 50 people will work for the company, including about 40 at the mine site.

Graphite is used in lubricants, computers and for many types of batteries.

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