IMX Resources (ASX: IXR) will bring the Nachingwea Nickel Copper Project in Tanzania under full control, strengthening the balance sheet and reducing impediments to achieving production in 2015.
IMX and joint venture partner Continental Nickel (CVE: CNI) have agreed to a business consolidation that will bring all of their activities under one single entity.
The move will simplify the structure of the two companies and reduce the complexities associated with bringing Nachingwea into production.
Neil Meadows, managing director of IMX, said: “The combination of IMX and Continental results in a stronger company with an impressive pipeline of high quality projects, including 100% of the potentially significant Nachingwea Nickel Project, Meadows said.
“With the project under single ownership, there is now a clear path to advance towards commencing Nickel production.
“The attractive asset base, together with a simplified corporate and project structure, dual ASX-TSX listing, an open register and a market capitalization of approximately A$100 million, provides a strong basis to significantly increase investor focus and the potential for inclusion in major stock market indices.”
Business combination agreement
IMX holds about a 37% interest in Continental. Under the definitive arrangement agreement, IMX will acquire all of the issued and outstanding common shares in the capital of Continental.
The company is offering Continental shareholders 3.7 IMX shares plus 0.5 of an ordinary share purchase warrant for each Continental share held.
Each full warrant entitles the holder to acquire one IMX share at A$0.60 or C$0.62, expiring three years from completion of the transaction.
Nachingwea project
The Nachingwea project is currently operated as a joint venture, with Continental as operator owning 75% and IMX owning 25%.
Earlier this year the two companies increased the JORC Resource at the Ntaka Hill deposits within Nachingwea by 150%.
The new Measured and Indicated resources are 12,786,000 million tonnes at 1.21% Nickel for 154,700 tonnes of contained Nickel (0.2% Nickel cut-off). New Inferred resources have increased to 45,037,000 tonnes at 0.30% Nickel.
In addition, the companies discovered copper at the Chilalo targets within the project area, enhancing the prospectivity of Nachingwea.
The impact of the discovery is that the prospectivity of the tenure is enhanced, with mineralisation over a 1 kilometre strike length. Peak values include up to 0.4 metres at 5.27% copper, 15.05 grams per tonne silver and and 0.41% zinc from Chilalo 6.
Cairn Hill funding
Activities on the project pipeline of the combined activities of IMX and Continental will be underpinned by cash flow from IMX’s Cairn Hill Mining Operation.
Cairn Hill is operated by Termite Resources, which is owned by Outback Iron, a joint venture between IMX (51%) and Taifeng Yuangchuang International Development Co (49%).
Phase one of production at the Cairn Hill project is a unique magnetite iron-copper-gold direct shipping ore operation, producing a premium coarse grained magnetite product with a clean saleable copper-gold concentrate.
IMX has also announced a phase two resource, which the joint venture project group is accelerating to begin production of a saleable iron intermediate concentrate of about 60%.
While the softening of iron ore and copper prices in recent months has seen the pricing of Cairn Hill magnetite copper ore under the phase one life of mine sales contract reduce by 25%, operations at the minesite are performing at designed capacity with cash operating costs free on board trending towards the target of A$75 per tonne with opportunities for further improvement already identified.
Importantly, Cairn Hill is located close to the Darwin to Adelaide railway, 55 kilometres southeast of Coober Pedy.
Analysis
The consolidation of IMX and Continental will take the market capitalisation of IMX Resources to about $100 million, up from $71 million at present.
The combined company will feature dual ASX and TSX listings, giving access to a broader investor base, and an attractive asset base and growth pipeline.
In addition, with a cash balance of more than $15 million coupled with ongoing operating cash flow from Cairn Hill, the company will have greater funding and development capabilities going forward.
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