Latin Resources (ASX:LRS) has favourably renegotiated the $2.5 million convertible note from Junefield High Value Metals Investments and has now cleared the majority of its debt off its balance sheet.
Interest costs will also be reduced complementing recent cost reduction measures.
The note was originally due to expire on 31st July 2015, however the company has signed a binding Terms Sheet with Junefield to settle the majority of the amount owing with repayment of the balance being deferred for 18 months.
Main terms and conditions of the binding Term Sheet are:
- Payment of $500,000 in cash to Junefield;
- Conversion of $1.5 million plus accrued interest into shares in the Company at the conversion price of $0.02; and
- Loan of $500,000 to the Company for an 18 month period at an interest rate of 12% per annum.
The conversion and loan is subject to the payment of the $500,000 to Junefield which will come from one of a number of funding options currently being considered by the company.
“We are very pleased to have renegotiated favourable terms on the convertible note with our largest shareholder Junefield which is an excellent outcome for the company,” managing director Chris Gale said.
“The deal strengthens the company’s balance sheet by clearing the majority of its major debt off its balance sheet and deferring repayment of the balance for another 18 months.
“Interest costs will also be reduced complementing recent cost reduction measures announced in the March 2015 Quarterly report.”
Junefield has a 13% interest in the company.
Recent Activity
In May, the company entered into a pre-AIM listing funding arrangement for US$300,000 with New York-based investment firm Magna Equities 11.
The Funding comprises a US$300,000 Unsecured Convertible Promissory Note and Subscription Deed with a five month maturity and an interest rate of 12% per annum.
This will fund the company’s AIM listing and for working capital purposes.
LRS can elect to repay the Convertible Loan at any time during the term in cash at a 20% premium.
It can be also be converted into AIM Depositary Interests at any time during the term, subject to certain conditions, at a 20% discount to the price at which the Depositary Interests are admitted to trading.
In March, Latin signed a memorandum of understanding with Minera Antares Perú S.A.C. (Antares), the Peruvian subsidiary of First Quantum Minerals (TSE:FM) to collaborate together exclusively for 12 months to discover mineral deposits worthy of further exploration and development.
This will be carried out over the 65,730 hectares of mining concessions in Southern Peru that are held by the company’s wholly-owned subsidiary Peruvian Latin Resources.
The company also raised $285,000 through a placement priced at $0.01 to sophisticated and professional investors.
During the March quarter, the company introduced further cost saving measures during the quarter that included the following:
- Staff numbers reduced by 7;
- A further 20% decrease to remuneration for most staff to reflect a move to 4 day week;
- Exploration and evaluation activities in Peru limited to supporting drilling and other programs funded by our JV partnerships;
- The cessation of all exploration and evaluation activities in Brazil;
- The closing of the Brazil office and a move to less expensive offices in both Perth and Peru; and
- The scaling back of all discretionary spend.
As a result of the abovementioned changes and other measures implemented by the company, net operating cash flows for the March 2015 quarter have reduced by 53% or $650,000 from the previous quarter.
The full impact of these changes will be received in the months ahead along with more planned cost savings from additional cuts to operating and overhead expenditure.
Projects
Latin Resources has over 160,000 hectares of mining concessions in Peru and Brazil.
In Peru, the company holds 110,000 hectares in the prolific Ilo copper district with all projects located close to port and infrastructure.
It is partnered with First Quantum at the Ilo Sur project and major Peruvian explorer Zahena, which is poised to start drilling at Ilo Este.
The company is currently identifying a joint venture partner for Guadalupito, which hosts a 1 Billion tonne JORC resource, to fund the Bankable Feasibility Study and take the project into production.
Southern Peru hosts over 125 billion pounds of contained copper in published reserves and resources.
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