Alkane Resources Limited’s (ASX:ALK) board has approved an $8-million investment into gold exploration company Explaurum Ltd (ASX:EXU).
The investment will provide funding to accelerate exploration and finalise the bankable feasibility study for the Tampia Gold Project.
Coming after Alkane’s $3.7 million transaction with Calidus Resources Ltd (ASX:CAI) earlier this month, the Explaurum investment is part of Alkane’s strategy of investing in junior gold companies with projects that have passed due diligence review and Alkane’s investment criteria.
These criteria include high exploration potential as well as requiring near-term development funding and Explaurum has announced positive exploration and feasibility results in recent months.
Explaurum is currently the target of a takeover offer from Ramelius Resources Limited (ASX:RMS), which Explaurum’s directors have unanimously recommended be rejected by the junior’s shareholders.
Alkane’s investment will be the subject of a vote at an Explaurum shareholder meeting in the coming weeks and Explaurum’s directors have unanimously recommended that shareholders vote in favour of Alkane’s investment.
Alkane managing director Nic Earner said: “The Explaurum investment is an exciting opportunity for Alkane shareholders, which we have been examining for some months, well before the Ramelius offer was announced.
“Working collaboratively alongside the existing Explaurum board and management team, Alkane brings additional capital and operating capability that will assist in the finalisation of the Tampia Gold Project feasibility study and the critical project financing process in 2019.”
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Alkane’s investment will be made through a placement of 66,666,675 ordinary Explaurum shares at an issue price of 12 cents per share, giving Alkane a 12.2% holding in Explaurum.
An additional 53,406,594 Explaurum options will be given to Alkane in two tranches, with 35% of the options exercisable at 13 cents per share and the remaining 65% exercisable at 14 cents per share.
If the options are exercised on or before November 1, 2019, Alkane’s holding will rise to 19.96%.
Alkane has provided an $800,000 deposit for the placement which will be offset against the placement proceeds once shareholder approval is obtained.
Alkane will also be entitled to receive a break fee of $400,000 under certain circumstances, including where Explaurum’s directors recommend a competing proposal.
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Once the investment is finalised, Alkane and Explaurum will form a technical steering committee with a view to progress the feasibility and development of the Tampia Gold Project.
The arrangement is expected to add further experience and current commercial cost understanding to Explaurum’s smaller but highly-capable team and consultants.
Alkane has had recent and extensive experience in project approvals, feasibility studies, commercial arrangements, commissioning and operation commencement with its development of the Tomingley Gold Operations and Dubbo Project.
Further to the arrangement, Alkane will have the right to nominate a director to Explaurum’s board if Alkane’s interest is at 12% or higher.
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Tampia is about 250 kilometres east of Perth in the Central Wheatbelt region of WA.
The project has an initial ore resource containing 675,000 ounces at 1.79 g/t gold as announced last May.
Alkane believes Tampia has strong exploration upside and opportunities to make further discoveries on the Explaurum tenement package.
The investment into Explaurum and Tampia’s development is expected to complete all necessary exploration, studies and financing arrangements ahead of a final investment decision in the second quarter of calendar year 2019.