Funding speculation continues as WMN beats bloody Monday

Published at Aug 26, 2015, in Mining

Western Mining Network (ASX:WMN) was one of the few stocks to survive the market carnage on Monday, as speculation mounts about a possible capital raising post board shake-up.

Even as the broader ASX shed almost $60 billion in value on the back of concerns over a hard landing in China, the ASX-listed small cap defied the odds to post a whopping 16.9% gain for the day to finish at 38c.

While the gains were reversed in yesterday’s trade as traders sought to take advantage of the price spike by selling down, the share market activity comes at a time when the company is expected to head to the market to raise capital.

At the beginning of the month WMN was questioned by the ASX on how it would continue to operate given it had cash on hand of $183,000 and a projected quarterly outflow of $900,000 as it continues to explore for graphite in Indonesia.

It told the market operator that it was confident new additions to the board post-GT Grafindo Nusantara (GFN) acquisition would place it in a good position to raise capital in the near-term.

“The company announced on 13th July this year that it had made hires to strengthen its board and management and engaged new advisers all of which the company believes will enhance its fund raising capabilities and enable WMN to continue to raise sufficient funds to develop and operate its business,” it said.

One of the key appointments post GT acquisition was that of David Putnam as interim CEO.

According to market documents, Putnam was brought on board specifically as a market adviser to “further develop the company’s corporate finance and capital markets strategy and lead the company through its next major round of funding.”

Further to that, the company outlined on the 4th of June that it would have a capacity of shares to place should it elect to undertake a further capital raising.

Why it needs the money

In July, it announced a deal whereby it would gain 100% of GFN in exchange for 25 million newly issued shares, with no cash outlay.

In return, WMN got its paws on two major tenements in Indonesia prospective for graphite, including one with an inferred resource of nearly 8 million tonnes with mean total graphite content of 12.7%.

It also has a mining license for that resource valid until July 2023.

While it has other projects on its plate in Indonesia, further drilling at both of the tenements would move some of the inferred resource into the indicated and measured categories.

However, at this stage it has not outlined a firm drilling program at these tenements.

WMN is seeking to bring an 8Mt graphite resource in Indonesia to market

It also signed a Memorandum of Understanding with South Korean graphene and graphene product manufacturer Carbon Nano-Material Technology Ltd (CMNT), with WMN to take a staged 51% stake in the company.

The stake would give WMN an insight into the whole value profit chain for graphite, with the company having a presence in the upstream segment via its Indonesian mining tenements and the downstream sector via the South Korean investment.

According to the terms of the MOU, WMN has agreed to issue 1.95 million shares to CMNT, but also throw in a cash equivalent of $1.95 million in order to pick up an initial 26% stake.

It will then have the option to grab the rest of the 51% at terms yet to be agreed upon.

Both the deals have the potential to be transformative for the ASX-listed junior, but will require capital to pull off.

With Putnam now on the board, investors are waiting to see what form any capital raising takes.

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