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PERTH (miningweekly.com) – ASX-listed Superior Lake Resources on Thursday unveiled plans to vend its interest in its namesake zinc project, in Ontario, into a TSX-V listed company called CROPS Inc.
The company told shareholders that since completing a bankable feasibility study (BFS) in 2019, Superior Lake had received several non-binding indicative debt proposals of up to $70-million for project finance, as well as expressions of interest from major global metal traders and smelters.
However, a weakening in the equity markets for junior resources companies, and the sharp decline in the zinc price towards the end of 2019, meant that the company was unable to secure the equity component required for a fully financed solution without substantially diluting existing shareholders.
Furthermore, the impact of the Covid-19 pandemic had made travel to the project from senior management, all based in Australia, nearly impossible, with Superior Lake telling shareholders that it was highly uncertain when regular international travel to the project could resume.
As a result, the company has taken the decision to hand control of the project to a management team based in Canada, in order to crystalise additional value in the project.
“In the current Covid-19 environment, this is an excellent outcome for Superior Lake shareholders in that it allows a highly reputable Canadian team with a strong track record in mine development and supported by Sprott, to continue developing this world-class zinc asset,” said Superior Lake executive director Grant Davey.
“This transaction enables our shareholders to retain exposure to the project while management turns its focus to adding shareholder value through other development opportunities in the resources sector.”
Under the terms of the proposed transaction, Superior Lake subsidiary Ophiolite Holdings would receive 128.9-million shares in newly vented CROPS, which will represent some 70% of the issued and outstanding shares of the company.
Ophiolite has received an initial non-refundable cash payment of C$25 000 and will also receive a C$200 000 cash payment on the completion of the transaction.
The transaction would be subject to a number of conditions precedent, including shareholder approval from both CROPS and Superior Lake shareholders, with a general meeting expected towards the end of October.
The transaction is also subject to CROPS completing a capital raise of C$3-million, priced at either 12c or 10c a CROPS share, with the final capital raising price dependent on market conditions at the time of the raising.
CROPS would also need to receive approval from the TSX-V to have its shares listed for trading following the completion of the transaction, with the vented company also expected to complete a ten-for-one consolidation of its share capital.
“The opportunity that this transaction creates for both Superior Lake and CROPS shareholders is truly exciting,’ said CROPS CEO Simon Ridgway.
“We have put together a team with vast experience in mine development and finance. In addition, and equally important, we have exploration geologists on board who know the rocks of Eastern Canada well. The exploration targets defined by the geophysical and geochemical work completed by Superior Lake represents an excellent opportunity to add years to the mine life defined in the BFS.”
The BFS estimated that an initial capital investment of $86-million would be required to develop the 325 000 t/y operation, delivering some 38 000 t/y of contained zinc and 1 400 t/y of contained copper over a mine life of nine years.