Given the ongoing weak market conditions, which have slowed the pace of divestment processes, and the continued lack of news regarding regulatory approval for the change of control of the key MunmuBaram project, we believe that operational risks have increased. In addition, the falling share price has increased financing risks (equity issue 1-2x current market cap expected in the next ~3-6 months) and is starting to cause uncomfortably high volatility in expected returns and dilution, and we wait for these risks to subside.

Hexicon's Q2 report contained no major surprises. The company is still awaiting regulatory approvals for the transfer of ownership of the key MunmuBaram project. As a result, we expect the establishment of a long-term ownership structure for the project, which could provide near-term financing and improve cash flow for project development, to be delayed until 2025. In addition, the immediate need for a cash infusion is forcing Hexicon to explore other financing options on uncertain terms. Against this backdrop, we believe that the near-term risk/reward profile is not favorable.

Hexicon will publish its Q2 report on Wednesday at 8:00 am CEST. We expect the company’s revenue to continue to be modest, driven mainly by consulting fees. However, we expect operating loss to decrease due to improved cost control. More broadly, we believe that project divestments will be the main growth drivers in the coming years. We therefore look forward to hearing more details on potential divestments, with a particular focus on the important MunmuBaram project.

Hexicon’s Q1 report did not provide any major surprises, although we view it positively that the company showed better cost control than expected during the quarter. However, the main focus in the short term is the process of establishing a long-term ownership structure for the MunmuBaram project, which could help Hexicon secure short-term financing and will be critical to assessing future capital requirements. However, considering that the parameters of the possible divestment remain unknown and the challenging market environment will put pressure on the project development, we stay on the sidelines and wait for a more attractive risk/reward profile.

Hexicon will release its Q1 results on Wednesday at 08:00 CEST. We are particularly interested in any updates on the development of the important MunmuBaram project. In addition, we are following comments on the development of the process for determining the long-term ownership structure of the project, as we believe this will be critical in assessing Hexicon's future capital requirements.