On 29 October 2018, Explaurum Limited (ASX: EXU) announced that Alkane Resources Ltd (ASX: ALK) has agreed to make a strategic investment in Explaurum, subject to Explaurum shareholder approval. The Directors of Explaurum Limited have unanimously recommended the shareholders to vote in favour of the Alkane investment in the absence of a superior offer. Following the release of this news, the share price of the Explaurum Limited decreased by 4.545 percent and the share price of Alkane Resources Ltd decreased by 10.638 percent as on 29 October 2018.
Currently, the cash position of Alkane Resources is very strong and as part of its strategy for increasing shareholder value, it is planning to invest part of its cash balance in junior gold companies. Alkane considers that the Tampia Gold project has strong exploration upside and it is also having other opportunities to make discoveries similar to the Mace discovery, which exist on the Explaurum tenement package which could enhance the already strong economics of the Tampia Gold Project. The Funds will be used to aggressively accelerate extensional drilling of Mace to fully test scale potential, intensive exploration drilling of highly prospective gravity and gold-in-soil confirmed regional Tampia targets and completion of the Tampia Project BFS.
Alkane and Explaurum are planning to form a technical steering committee to accelerate the progress and development of the Tampia Gold Project. It is expected that this will bring even greater experience and current commercial cost understanding to the smaller but highly capable Explaurum team and its consultants. The Alkane team is currently having recent and extensive experience in project approvals, feasibility studies, commercial arrangements from the work it has done on Tomingley Gold Operations as well as the large body of work it has undertaken on its Dubbo Project.
According to the investment arrangement, Alkane is planning to invest AUD$8.0m in Explaurum through a placement of 66,666,675 ordinary shares at an issue price of 12.0 cents per share to become a 12.2% shareholder in Explaurum. Alkane will be entitled to receive a break fee of $400,000 under certain circumstances, including where the Explaurum directors recommend a Competing Proposal. Alkane has the right to terminate the agreement under the certain circumstances, including where the Explaurum directors recommend a Competing Proposal, and where acceptances under the Ramelius Offer reach 30%. Explaurum will grant Alkane 53,406,594 Explaurum options exercisable on or before 1 November 2019 in two tranches, first will be 18,692,308 options exercisable at 13.0 cents per share and second will be 34,714,286 options exercisable at 14.0 cents per share. Alkane is entitled to appoint one Explaurum Director and a 12-month anti-dilution right as long as it has a shareholding of at least 12 percent for more than 10 ASX trading days. And, Alkane is also having first right of refusal in relation to any proposed mezzanine debt, royalty or metal streaming over $1 million.
EXU’s shares traded at $0.105 with a market capitalization of circa $52.96 billion and ALK’s shares traded at $0.210 with a market capitalization of circa $118.93 million as on 29 October 2018 (AEST 4:00 PM).
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