Grangex AB: Potential in milestones

The DFS is ready, all permits are in place, the equipment purchase list drawn up, political backing is in place, customers stand in line and investors are flocking to the opportunity. All that remains is to split the bill. When done, by year-end, we will have a much clearer picture of the value accruing to Grangex shareholders. It looks promising!

Positive DFS and other favourable conditions

Data in the DFS improved compared to the PEA: Higher total concentrate production, lower OPEX and raised price estimates from independent FastMarkets. However, production has been extended to 25 years (19) and the dollar has weakened significantly. CAPEX are divided into two phases, with Phase 1 required to restart parts of the open pit mine next year for production to start in November 2026. The next investment phase, which is required for full extraction and more efficient production, can wait until 2029, meaning it can be self-financed with cash flows from production until then. According to our calculations, this means that the total financing requirement – to be settled this autumn – amounts to approximately USD 235 million.

Per ton of concentrate, CAPEX is significantly lower than other mining projects and the cost situation is very competitive, even compared to non-DRI ore. Add on well-kept equipment, a politically stable country close to customers in Europe, simple logistics with an ice-free port a few kilometers away and a great partner in Anglo American.

Value for Grangex shareholders – more potential

In our previous analysis, we indicated a value of around SEK 40-50 per share – almost 3x then-current price despite having doubled in three weeks prior – with potential for significantly more. With the DFS completed, visibility and thus value are now increasing.

If we count USD 140m in loans (~60%) and Anglo's subordinated USD 27.5m loan as equity, there remains USD 70-75m in equity (in-cluding fees) that must be raised in Grangex and/or Sydvaranger. Even with high return requirements on that capital, Grangex should be able to retain its majority stake in Sydvaranger. If everything goes right, the potential from here could be as much as 4-5x more, but significant risks remain; unresolved financing, operational risks at the start-up of a large mine, dilution for current shareholders in Grangex, etc. We must not forget that concentrate production and deliveries are still 1.5 years away according to plan. Only then will we see if all plans come to fruition, and the road to get there is full of pitfalls. And we haven't even mentioned the risks in the development of ore prices, quality premia or currencies until production begins.

As before, we urge caution in sizing the position in such a volatile stock, but believe that an investment is clearly justified. At present, we would dare to buy up to approximately double the current price, as continued de-risking, hopefully with a favourable solution to the financing situation, will justify such a price target and well beyond.