JOHANNESBURG (miningweekly.com) – Mozambique-focused Baobab Resources on Tuesday recommended that shareholders vote in favour of a capital-raising plan to fund the definitive feasibility study (DFS) work programme on its pig iron and ferrovanadium project in the Tete province.

The conditional placing agreement granted African Minerals Exploration and Development Fund subsidiary Redbird various subscription options – expiring June 2016 – which could boost its shareholding to 37.85% and potentially raise over £4-million for Baobab.

“The company is very pleased to receive such a firm show of support from its principal shareholder in what is a challenging market. Not only is the placing at a significant 15% premium, but it also signals the fund’s [Redbird’s] strong belief in Baobab’s immediate and longer-term prospects. The first tranches of funding enable Baobab to accelerate key components of the bankable feasibility study this year, which will address and mitigate areas of perceived risk and optimise flow sheets,” Baobab chairperson Jeremy Dowler previously stated.

The group, in October, moved to raise funds through an immediate five-million share buy-out from Redbird, which, at 15p apiece, raised £750 000 before expenses and increased the investor’s stake in Baobab from 26.73% to 27.93%.

Baobab on Tuesday encouraged shareholders at the upcoming December 30 general meeting to vote in favour of the placing agreement, which enabled Redbird to subscribe for another five-million shares at 20p apiece, equating to £1-million.

The company agreed to conditionally place with Redbird a further 8.5-million shares at 15p each, or £1.27-million, and grant Redbird an option for an addition of 8.5-million shares at an exercise price of 20p apiece, or £1.7-million.

Redbird would, subject to passing of the conditional placing resolution and the waiver, also be granted options to subscribe for up to 27-million shares at an exercise price equal to 105% of the volume-weighted average price for the five consecutive trading days immediately prior to the date of exercise.

The funds raised through the placing would be used primarily for the Tete pig iron project’s DFS activity, which included pilot plant metallurgical testwork on a 15 t bulk sample and a limited 3 000 m drilling programme to bring resources to measured status and support the first 25-year mine life of the project.

The DFS would also focus on the continuation of the environmental studies and a move to memorandum of understandings for power, rail and port allocation, as well as a detailed study on the power-generation options available to the project and long-term supply solutions.