Kore Potash PLC (AIM:KP2, ASX:KP2, JSE:KP2) shares were on the back foot on Tuesday after announcing a US$1 million fundraise along with new terms with its contractor for the Kola project, in the Republic of Congo, amidst delay.
The company in separate statements announced the equity raise and the contract changes.
PowerChina, a subsidiary of Kore’s partner and contractor SEPCO Electric Power Construction Corporation has, following a review of the project design and schedule, now subcontracted five technical groups who have commenced additional design and engineering works.
It includes additional work on the underground mine, mineral processing jetty and transhipment operations, energy transportation and storage, conveyor systems and material handling, the company said.
PowerChina informed the company that the additional work will cost more than US$10 million, though has capped Kore’s maximum contribution to the bill at US$5 million.
Kore is now required to pay US$1 million, with the remainder contingent upon fundraising and SEPCO’s delivery of the EPC contract – the AIM-quoted firm said it expects to pay through three tranches over a year, starting in October.
In a stock market statement, Kore commented: “The company and the intended financiers within the Summit consortium are highly supportive and recognise that undertaking these works now should further de-risk the design of Kola to the benefit of the company, the financiers, and the constructor.”
“Kore Potash continues to work with the Summit consortium to provide financing for the full construction cost of Kola which is intended to be based on royalty and debt finance.”
Kore said the consortium has advised that the financing proposal for the full construction cost of Kola will be provided within six weeks of EPC terms being finalised.
In London, Kore Potash shares are down 12% in Tuesday morning’s deals.
Raising US$1 million
Separately, Kore announced that entities associated with its chair David Hathorn are providing the US$1 million of new funding.
It raised US$800,000 through a subscription share offer existing shareholders, and, it was issuing US$200,000 of convertible loans (of US$100,000 each) to bring the funding to US$1 million.
The raise is to enable payment of the first US$1 million of the design over-run.
Additionally, Kore noted that its two largest shareholders Oman Investment Authority and Sociedad Quimica y Minera (SQM) will be given, in line with their investment agreements, the opportunity to subscribe for new ordinary shares on the same terms as in the latest raise.
They each have 21 business days to inform the company of their intention.
Kore chair David Hathorn participated in the raise, providing both of the US$100,000 loans, and, the Harlequin Investments Ltd vehicle (a 10.7% shareholder in Kore), in which Hathorn is a substantial shareholder, has subscribed for all 31.09 million new shares which will be issued at 0.5p each.