PERTH (miningweekly.com) – ASX-listed junior Metminco will raise up to A$1-million through the issue of unsecured convertible notes to progress a merger with Colombia-focused Andes Resources.

Under the proposed merger, Metmico will acquire Andes through an off-market takeover offer, offering Andes shareholders 33.5 new Metminco shares for every one Andes share held.

In conjunction with the merger, Metminco will also undertake a share consolidation at a ratio of 1-for-30, and will convert some A$2.5-million of repayment due to RMB Australian holdings into equity in the company, at a price of 0.3c a share, with an improved repayment schedule for the final A$2-million due to RMB in order to minimise the burden on the company’s cashflow.

The unlisted Andes holds a portfolio of gold/silver/copper exploration projects in the Cauca Valley, in Colombia, which is in close proximity to Metminco’s existing mineral resource of some 877 000 oz of gold and reserves of 457 000 oz at its Miraflores deposit, as well as its Tesorito prospect and the large undrilled Chuscal target, which is in joint venture with gold miner AngloGold Ashanti.

“The acquisition of Andes gives Metminco not just further exposure to a large exploration portfolio in the mid-Cauca gold belt of Colombia, but also access to an experienced board, management and a new shareholder base of influential, experienced and financially strong shareholders,” said Metminco executive chairperson Kevin Wilson.

“Together with our Quinchia gold project, we now have two exploration camps that we believe offer near-term development potential. Along with the favourable restructure of our existing repayments to RMB, the transaction brings enhanced financial capacity, enabling us to substantially defer debt repayments, thus maximizing capital towards exploration activities.”

Andes MD Jason Stirbinskis said that the merger of the portfolios created an extensive project pipeline and optionality across vein-hosted and porphyry-hosted targets, from greenfield to advanced-stage.

“We are particularly excited by Metminco’s recently acquired Chuscal prospect and its potential to dramatically enhance the near-term production opportunities of Metminco’s Quinchia project.”

Stirbinskis noted that combining forces, the merged company also achieved a critical mass of greater appeal to a broader investment base, providing Andes shareholders with an ASX listing in the near term.

In support of the merger, the two companies would jointly raise A$4-million, with both Metminco and Andes raising A$750 000 working capital raise, with Metmico to raise the balance of the A$4-million, before cost.

Metminco on Friday said that the proceeds from the issue of the unsecured convertible notes would be use to progress the merger.

The convertible notes will have a face value of A$3 000 each, are interest free and payable in limited circumstances. The notes will be issued in a single tranche, but will be converted into ordinary shares in Metminco in two tranches.

The first 115 convertible notes will be issued under Metminco’s existing placement capacity, and will convert into shares at a price of 0.3c each, at the completion of the proposed merger.

The second conversion of the 219 remaining convertible notes will be subject to shareholder approval, and will also convert at a price of 0.3c each on the successful completion of the merger.

Should the merger not proceed, the conversion price of the notes will reduce to 0.2c each.