- Base metals are climbing the price ladder swiftly on global front with both copper and nickel witnessing a steep recovery.
- Recovery in base metal prices is now waking domestic players from hibernation with many making announcements concerning project development.
- Several players on the exchange such as IGO Limited (ASX:IGO) and Sandfire Resources Ltd (ASX:SFR) are witnessing market interest.
- On the development counter, IGO has enhanced its Fraser Range holdings with an agreement to secure nine exploration tenements of Boadicea Resources Limited (ASX:BOA) in the region.
Recovery in base metal prices is coming as hope for ASX-listed base metal companies such as ASX 200 player IGO Limited (ASX:IGO) and Sandfire Resources Ltd (ASX:SFR) with every uptick in the underlying commodity of their business improving market sentiments around them.
To Know More, Do Read: Copper Miners Ballooning on Exchange As Copper Surge Lifts Market Sentiments
The surging copper and nickel prices on the global front are now prompting such base metal players to fast track their operations and develop key assets to meet the global demand for these metals.
To Know More, Do Read: Copper Rush Drawing Australian Titans; Australia To Climb the Supply Ladder?
Post witnessing a strong performance in FY2020, IGO is once again making a move with the expansion of its holding at the Fraser Range project.
IGO Limited Binds Agreement with Boadicea Resources to Extend Tenements at Fraser Range
IGO Limited (ASX:IGO) has reached an agreement with Boadicea Resources Limited (ASX:BOA) through its wholly owned subsidiary, IGO Newsearch Pty Ltd, to secure key ground positions across the Fraser Range region, including one tenement immediately along strike from the Nova Operation.
The agreement signed by the Company includes three main agreements, i.e., a conditional asset sale agreement, subscription agreement, and royalty agreement.
Conditional Asset Sale Agreement
Under the asset sale agreement, BOA would grant IGO Newsearch Pty Ltd exclusive rights to explore for minerals for five years over nine exploration licences of BOA or ballot wins located within the Fraser Range gravity high.
The nine exploration licences, on which BOA would allow IGO’s wholly owned subsidiary to explore, are as below:
- E28/1932 Symons Hill
- E39/2148 Giles
- E28/2721 White Knight
- E28/2849 Transline North
- E28/2866 Transline South
- E28/2888 Transline West (1)
- E28/2895 Transline West (2)
- E28/2937 South Plumridge
- E28/2952 Giles South
IGO suggested that within five working days of approval of the Resolution by shareholders, the Company would pay a non-refundable Upfront Consideration of $5,500,000 in cash along with a Subscription Price of $1,500,000 to subscribe for 6,250,000 ordinary shares of BOA at 24 cents a share.
Upon meeting the above payment, BOA would grant Newsearch exclusive right for above nine tenements and an entitlement to nominate a non-Executive Director for appointment to the BOA board at no additional cost to the Company.
Furthermore, once Newsearch declares a JORC Resource withing the five years of exploration, BOA would sell and transfer the Fraser Range Assets to Newsearch upon the payment of $50,000,000 cash.
The Royalty Agreement
In the same line of process, Newsearch would grant BOA a Net Smelter Royalty of 0.75 per cent on all revenues associated with mineral production from the Fraser Range Assets. Also, the Net Smelter Return Royalty would allow for standard deductions of transportation, smelter and refining costs associated with the revenue, excluding mining and concentrating costs.
The Subscription Agreement
As suggested above, under this agreement, the Company would subscribe for 6,250,000 ordinary shares of BOA at face value of $0.24 a share, leading to a price consideration of $1,500,000, upon taking shareholders’ approval.
The issue price of $0.24 a share represents a 12 per cent premium to the 60-day volume-weighted average price, and IGO would hold 10.1 per cent of the total issued capital of BOA.
Loan Deal and Other Provisions
Under a provision of the agreement, Newsearch would lend $250,000 to BOA, repayment of which would be deducted from the Upfront Consideration of $5,500,000.
Apart from that, Newsearch would manage and oversee the Fraser Range Assets of BOA for five years while taking care of all exploration costs.
However, Newsearch can choose to withdraw from the agreement at any time during the period of five years with a provision to return all nine exploration assets to BOA along with any exploration data generated by Newsearch during the tenure.
Also, IGO being the owner of Newsearch would back all obligations under the asset sale agreement.
- Over the tenements counter, IGO suggested that Symons Hill tenement is highly prospective and adjoins eastern boundary of the Nova mining lease; also,
- It covers a considerable extension of the prospective stratigraphy and structures that host the Nova-Bollinger deposits and forms part of the same mafic-ultramafic intrusive network.
Market Reaction and General Trend
IGO stock recovered from the level of $3.270 (intraday low on 23 March 2020) to the recent high of $5.730 (intraday high on 28 July 2020), marking a price appreciation of ~ 75.22 per cent.
However, post a steep recovery, IGO stock has now started taking a downside correction with the price falling from the recent peak of $5.730 to the present level of $4.350 (as on 4 September 2020).