Superior Lake Resources Limited (ASX: SUP) is an ASX listed company from metals and mining sector. It has been working on one of the highest-grade zinc deposits in Superior Lake Project in North Western Ontario, Canada. The project has JORC resource of 2.15 Mt at 17.7% Zinc, 0.9% Copper, 0.4 g/t gold and 33.5 g/t silver.
On 1st May 2019, the company announced that it has entered into a binding agreement to acquire an additional 15% stake of Ophiolite Holdings Pty Ltd which holds the company's Superior Lake Zinc Project. The agreement has been signed with certain minority shareholders of Ophiolite, to which the company has offered 494,545 Superior Lake shares for every Ophiolite share. After the agreement, the company’s total stake in the project will increase by up to 85%.
Mr Davey, Executive Director of Superior Lake, controls two of the three selling minority shareholding entities. The acquisition is subject to Superior Lake’s shareholders’ approval (in the annual general meeting, expected to be held in June 2019) as these entities are related parties of the company.
Two minority shareholders, controlling 10% of Ophiolite have elected not to participate in the sale. For them, a 60-day pre-emptive right has been given to acquire a proportion of the offered Ophiolite shares. Mr Davey intends to sell half of the shares he holds jointly, with a minority shareholder or a further 2.5% of Ophiolite in accordance with the pre-emption process in the future.
If the minority shareholders do not exercise their pre-emptive rights, Superior Lake will issue them a total of 185,454,375 shares as consideration. If they choose to exercise their rights, the Superior Lake will then issue them a total of 162,705,305 shares as consideration. After the Bankable Feasibility Study (BFS) gets completed the minority shareholders will be required to contribute towards funding in proportion to their shareholding in Ophiolite.
Recently, the company had hired an outside entity called Orimco Resource Investment Advisers, as its advisor to secure financing for the construction and development of the Superior Lake Zinc Project.
Cash flow statement for the March 2019 quarter: The company has used net cash of A$1.58 million from the operating activities including A$956,000 of development cost. It has not indulged in any investing activity during the period and used A$3,000 towards financing activity. At the end of the reporting period, the company had net cash of A$2.64 million with projected cash outflow of A$1.53 million for the next quarter.
Stock performance: The market capitalisation of the company is A$19.04 million. The 52-weeks high and low of the stock is A$0.054 and A$0.020 respectively. The stock is trading at A$0.022, (as at 12:25 PM AEST, 2nd May 2019). Over last 1 year, the stock has delivered a negative return of 26.67%, and the YTD return stands at negative 21.43%.
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