Response from Chairman11 Jul 2023 10:04
In response to a number of shareholders contacting the company about the current SP price, the chairman has sent out the following email which covers all of the issues and also goes some way to explaining the current SP (in 2 parts)
Subject: RE: Pensana plc
Dear xx
Many thanks for taking the time to set out your concerns regarding Pensana's development and financing plans.
Thank you also for the specific concerns you raise with respect to the funding arrangements and the examples you give of the pathway being undertaken by peer company Arafura with respect to funding and offtake arrangements.
As you are aware, outside of Lynas and MP Materials very few rare earth developers have been successful in attracting funding and bringing a mine into production. Lynas continues to be bailed out with soft loans from the Japanese Government and as you are aware MP was reversed into a US$500 million SPAC and has relied on several large equity rounds to fund its US$2 billion development.
Arafura, Hastings, Northern, Peak, Mkango, Rainbow et al have all been around a very long time and despite repeated announcements of conditional financings and offtake agreements none has successfully drawn down finance and put a mine into production.
The challenge Pensana has faced is having its main asset in Angola and the very limited pool of capital available to fund the project. Hence the plan to move downstream and capture the separation premium at Saltend in the UK, the Green Bond rating from Cicero, the bond offer from ABG Sundal Collier, the equity support from M&G, together with the (albeit small) conditional support from the UK Government Automotive Transformation Fund.
We also entered into a 25% offtake deal, not with an intermediaries or OEMs as we have seen with Arafura et al, but directly with the world's largest and most important non-Chinese magnet manufacturer. It is my understanding that this is the only such agreement in existence.
As you point out the combination of weak equity market conditions, unexpectedly low NdPr prices and interest rate rises have made our circa US$500 million funding requirement unobtainable in the short term which is why we entertained the US$220 million equity injection from the strategic investor and associated ABSA project finance which, for reasons unrelated to Pensana, fell over at the very last moment earlier this year after both Boards had approved the transaction.
We acknowledge that the release of the Interim Accounts shortly afterwards could have been better handled thereby avoiding the adverse market response.
In response and in relatively short order we have announced a revised development and funding strategy backed by our major shareholders FSDEA and M&G, supported by the Angolan Government and have mandated ABSA to provide the project funding.
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