PERTH (miningweekly.com) – Shareholders of potash hopeful Elemental Minerals have smiled on news that the company has signed binding agreements with strategic investors worth some $50-million.
Elemental on Friday said it had signed separate interconditional definitive investment agreements with three strategic investors, Sociedad Qumica y Minera de Chile (SQM), the State General Reserve Fund of Oman (SGRF) and Summit Private Equity, which would see an equity injection of $50-million through the issue of fully paid ordinary shares, priced at 20c each.
Elemental will also provide 50-million options, at an exercise price of 30c each, to the strategic investors.
MD Sean Bennett noted that the strategic investment was a landmark event for the company and would allow Elemental to pursue its strategy of decreasing risk through the various stages of development to construction.
The investment also allows Elemental to appoint an engineering and construction consortium to complete a definitive feasibility study on the flagship Kola sylvinite project, in the Republic of Congo, within 14 months, and will allow the company to carry out additional drilling at the Dougou extension to test a high-grade exploration target.
“The new strategic investors and the construction consortium bring expertise in many different areas such as potash, construction, financing skills and offtake requirements to name but a few,” said Bennett.
“This is in addition to the significant financial strength they bring to the business at a time when junior mining companies are struggling to attract investment.”
To provide additional short-term funding, Elemental could agree to bring forward its share issue to Summit, with a subscription amount of up to $2-million.
The balance of the investment will be subject to shareholder and regulatory approval.
Under the investment agreements, preliminary conditional offtake rights have been granted to SQM and SGRF for a combined minimum of 40% of yearly production from Kola, which could be as much as 800 000 t/y.
The companies will also be granted the right to nominate a person to the Elemental board of directors.
Meanwhile, to minimise the dilution to existing shareholders, Elemental and Summit have also agreed to undertake a capital raising, allowing current shareholders to subscribe for shares in Elemental at the same issue price as the strategic investors.
The capital raise will reduce Summit’s investment amount by around $5-million.