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VSA Morning Miner, 22/01/19

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M2 Cobalt (CVE:MC)

M2 Cobalt (MC CN) and ASX listed Jervois Mining (JRV AU) have announced a friendly at market merger to be completed as a Plan or Arrangement whereby JRV will acquire all of the outstanding share capital of M2. Each common share of M2 will be exchanged for one common share of JRV giving an implied offer price of C$0.262/sh for JRV shares and C$0.247/sh. for M2 based on the 10 day VWAP ending 21 January 2019. This results in pro forma ownership of the enlarged entity of 77.9% for existing JRV holders and 22.1% M2 holders. In addition JRV has provided a convertible bridging loan of C$3m to support M2 during the process; the terms of the loan indicate a 15%pa interest rate with a strike of C$0.245/sh.  

The transaction remains subject to regulatory approval and the new BoD of the enlarged group will consist of three JRV directors and one M2. JRV has a board consisting of former Glencore Xstrata executives whose recent focus has been on the Nico Young nickel cobalt project in New South Wales on which a JORC compliant resource of 167.8mnt at 0.59% Ni and 0.06% Co has been defined. A PFS to confirm the viability of a heap leach flowsheet is being finalised currently which is anticipated to demonstrate a low capital intensity project.

We have highlighted the scale of the anomalies that have been discovered by M2 in Uganda to date as well as the geological similarities between Uganda and the DRC. Given the scale of the advanced project in JRV’s portfolio this suggests that the JRV management team has recognised the potential for Uganda as the next major cobalt district and we believe that a combination of M2’s in country experience and JRV’s commercial and development expertise could see that realised.     




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