Energy and Minerals Australia (ASX: EMA) should trade firmer after signing a $12 million capital raising agreement with Forrest Family Investments, controlled by Andrew Forrest of Fortescue Metals (ASX: FMG) fame.
In addition, $24.5 million of debt will be converted into equity, demonstrating strong support by EMA’s long-term financial backers.
The Company’s note holders - Acorn Capital and its clients, Macquarie Bank, and the Element Resources Fund - have all agreed that the debt owed to them shall be repaid in shares, subject shareholder approval.
These two transactions will restructure EMA's balance sheet and increase its net assets by $36.5 million.
EMA remains focused on completing the feasibility study on its Mulga Rock uranium Project in Western Australia, and achieving its target of production by the end of 2016.
The company will issue 400 million shares to Forrest Family Investments at $0.03 each to raise the $12 million, with one free unlisted option attached at an exercise price of $0.05 and an expiry date of 30 June 2016.
Upon completion of the Placement and the Notes Conversion, it is expected that Forrest Family Investments will have an interest of 27.86% in EMA.
And after the note conversion, Macquarie will hold an interest of 20.98%, with Acorn at 23.21%.
In the meantime, the Noteholders have also agreed to extend the repayment date of the Promissory Notes, and all other ancillary dates relating to the Promissory Notes and Convertible Notes from the 2nd May 2014 to 31st July 2014.
Mulga Rock is one of Australia’s largest undeveloped uranium resources, and also contains nickel, cobalt, rare earth elements, yttrium, scandium, vanadium, copper, zinc and gold.
The project is located 240 kilometres northeast of Kalgoorlie-Boulder, and importantly shares access infrastructure with the large Tropicana Gold Project.
Andrew Forrest's new investment, together with the note conversion by its large financial backers, is a strong show of support for EMA, which is capitalised at $20 million.
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