PERTH (miningweekly.com) – Bauxite developer Cape Alumina has secured A$250 000 debt financing from major shareholder MetroCoal to progress its Bauxite Hills project, in western Cape York, Queensland.

The junior company reported on Wednesday that the loan would enable Cape Alumina to preserve its existing cash resource, pending resolution of MetroCoal’s takeover bid, which was launched in August, to continue to advance its Bauxite Hills project.

The funding would cover environmental work, bauxite analysis and additional drilling to enable a measured or indicated Joint Ore Reserves Committee-compliant resource definition to be estimated.

The unsecured loan would bear interest of 10% a year, and would be repaid in cash on either October 3, 2015, or within 21 business days of Cape Alumina issuing at least A$1-million of marketable securities, or once the company had entered into additional debt.

MetroCoal said it had provided the funding to ensure that Cape Alumina could commit to the work programme planned for the remainder of the dry season, as missing the cycle could delay the project evaluation, permitting and feasibility study programmes by up to 12 months.

Earlier this month, MetroCoal launched an off-market takeover offer for the remaining 43% in Cape Alumina shares, which it failed to secure in its first takeover offer in March this year.

Under the new offmarket offer, MetroCoal is offering Cape Alumina shareholders one of its own shares for every 1.3 Cape Alumina shares held, with the offer representing a 35% premium to the 20-day volume weighted average price of Cape Alumina shares.

MetroCoal on Wednesday urged Cape Alumina shareholders to accept the takeover offer, pointing out that the bauxite developer was unlikely to raise the necessary funds for the Bauxite Hills project, without MetroCoal support.

Earlier this month, Cape Alumina reported a 19.85-million-tonne direct shipping ore (DSO) inferred resource at Bauxite Hills. The inferred DSO resource was in addition to the previously announced beneficiated bauxite inferred resource of 15.1-million tonnes, and an in-situ resource of 22.1-million tonnes.

The DSO product could be produced and shipped at low capital and operating costs, and had the potential to increase the economic viability of the project.