Intergroup Mining Limited IPO is a gold mining firm in Australia that is providing unregulated 12 per cent convertible loan notes that pay 12 per cent per year for three years.
What exactly is Intergroup Mining?
Intergroup Mining is a company focused on exploring and developing mining projects, particularly gold and kaolin. The leadership team includes Walter Doyle as CEO, Brian Stockbridge as Non-Executive Chairman, and Stephen White as Director. Both Doyle and Stockbridge also hold key positions at NQ Mining, an Australian mining company listed on the NEX exchange.
What is the investment’s level of security for this mining investment?
These mining investments are uncontrolled business loans, and if Intergroup Mining fails, you could lose all of your money. The bonds’ objective is to enable Intergroup Mining to mine gold in the Brilliant Brumby mine.
If Intergroup Mining fails to generate sufficient returns from its gold mine, or if Intergroup Mining runs out of money to service these bonds for any other reason, there is a danger that it will default on interest and capital payments to investors.
Intergroup Mining may have discovered gold in its gold mine, but its capacity to return the capital and interest will be determined by whether it can extract and sell the gold profitably enough to pay its bondholders 12 per cent per year and have the project profitable within three years (when repayment becomes due).
The investor documents I’ve seen go into great detail about the geological characteristics of Intergroup’s mine, but there’s very little information regarding Intergroup’s projected revenues and expenditures, which is what bond investors care about.
Notes that are convertible
At the current share price, the shares can be converted to equity shares.
Investors who convert their bonds to equity face the same risk of total loss (as with any individual equity share) if they are unable to find a market for their shares.
Should I put my money into Intergroup Mining?
This blog is not intended to provide financial advice. The remarks that follow are statements of publicly available facts or commonly accepted investment principles, not personalised recommendations. If in doubt, investors should seek the advice of a regulated independent financial adviser.
This investment, like any unregulated corporate bond, is only intended for knowledgeable and/or high-net-worth investors that have a considerable existing portfolio and are willing to risk losing all of their money.
Any investment that pays 12% a year should be regarded as extremely risky. Intergroup Mining’s bonds are riskier than a standard diversified stock market fund because they are individual securities with a chance of total and permanent loss.
Investors should ask themselves the following questions before investing:
- How would I feel if the investment failed, the security was sold without raising enough money to recompense all investors, and I lost all of my money?
- Do I have a large enough portfolio that a complete loss of my investment will not financially devastate me?
- Is it okay with me if I exercise the option to convert the bonds into equity shares, knowing that my capital could be locked up permanently because Intergroup Mining shares cannot be sold on any recognised exchange?
Transaction Overview
IG Mining aims to secure funding of A$17 million, offering shares at a rate of A$0.16 per share, which corresponds to an approximate pre-money valuation of A$137 million. The company intends to achieve a listing on the ASX (Australian Securities Exchange) in 2023.
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