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Metro Mining Ltd (ASX:MMI) has received shareholder approval for the issue of shares to Greenstone Metro Holdings LP as part of their strategic funding arrangement. Greenstone has become Metro’s largest shareholder and will provide ongoing strategic support for the development of Metro’s flagship Bauxite Hills project located in northern Queensland. Metro will issue $8.9 million worth of shares giving Greenstone a 19.98% interest. Furthermore, an additional US$20 million of follow-on equity support is available for construction of Bauxite Hills. Metro is fully funded through to a decision to mine. Bauxite Hills The project has a direct shipping ore resource of 65.3 million tonnes and a mine life in excess of 13 years, and has been classified as a project of regional significance by the Queensland Government. Production from Bauxite Hills is expected during Q2 2018. The project has a low capital expenditure of A$40 million, an internal rate of return (IRR) of over 150% and is forecast to generated average annual EBITDA of A$133 million over 13 years. Greenstone Greenstone is a specialist mining and metals private equity fund established by former senior JP Morgan and Xstrata executives in 2013. The fund has significant in-house technical expertise including bauxite and aluminium. It has an experienced ASX investment track record having invested in Heron Resources Ltd (ASX:HRR) and Avanco Resources Ltd (ASX:AVB). The 10 year fund has a long term investment horizon. Bauxite market Bauxite is the primary ore of aluminium and is the key ingredient for manufacturing aluminium. 4-6 tonnes of bauxite produces 2 tonnes of alumina which produces 1 tonne of aluminium. The China seaborne market is driving bauxite demand and CM Group has forecast Chinese bauxite imports to increase at a CAGR of 7% for the next 15 years. Australia is ideally placed to meet increased Chinese demand with proven, well accepted product and key freight advantages. Share price performance The Metro share price has doubled year to date, currently trading at $0.125. The trading price represents a strong premium to the recently completed placement, priced at $0.085. Furthermore, Metro is covered by two Australian brokers with price targets of $0.20 and $0.26. |
