Archer Materials Ltd (ASX:AXE) (OTCMKTS:ARRXF) (FRA:38A) is progressing well with the sale of Australian mineral tenements to fund its Advanced Materials business strategy with both transactions expected to complete by the end of September 2021.
Previously, the company announced its intention to sell the mineral tenements to companies that intend to undertake an initial public offering and list on the ASX.
Archer is selling two Eyre Peninsula tenements in South Australia to NextGen Materials Pty Ltd, formerly Baudin Minerals Pty Ltd, and all of the company’s remaining tenements to iTech Minerals Pty Ltd.
NextGen and iTech have informed Archer that they each expect to lodge a prospectus and list on ASX by the end of September 2021.
The sale of the tenements will allow Archer to apply for a change of GICS code to ‘Semiconductors’ and inclusion in the S&P/ASX All Technology Index (ASX:XTX).
NextGen Materials transaction
The purchase price payable by NextGen for the purchase of the two Eyre Peninsula tenements include:
- Payment of A$2 million, of which Archer has already received A$150,000 cash and, at completion, will receive the remaining A$1.85 million cash or NextGen shares;
- Bonus payment equal to 5% of the enterprise value of NextGen at the time of ASX listing, paid in cash or shares at the election of NextGen; and
- A 2% net smelter return royalty on the value of all minerals extracted from the NextGen tenements.
Archer’s Campoona Graphite project and other graphite mineral resources are on the NextGen tenements and the company has retained these graphite projects and the right to explore for graphite on them.
The company intends to use the proceeds from the sale of the tenements to fund the building of the 12CQ quantum computing chip and Archer’s biochip.
iTech Minerals transaction
Archer has agreed to sell the graphite rights and all of the company’s remaining mineral tenements, excluding the NextGen tenements, to iTech Minerals Pty Ltd.
After the completion of the sale and purchase of the iTech Assets, Archer will receive 50 million ordinary shares in the capital of iTech, following its intention to undertake an initial public offering at A$0.20 per share and list on ASX.
At completion, Archer will receive 50 million consideration shares, which the board plans to distribute to Archer shareholders by way of a pro-rata in-specie distribution, subject to the receipt of favourable tax advice and regulatory and Archer shareholder approvals.
Shareholders are likely to receive one new iTech share for every 4.6 Archer shares held at the record date.
The exact ratio may vary and will be dependent on the number of Archer shares on issue at the record date and the effects of rounding partial entitlements.
This sale of the iTech assets will be subject to Archer shareholder approval at a general meeting.
The record date for the entitlement to iTech shares will be a date set by the Archer board after the meeting, which the company intends to hold in late July 2021.
Reason for sale
The sale of the tenements will see Archer simplify its business model and turn into a pure-play deep technology company, focusing on its Advanced Materials business.
This is consistent with Archer's strategy of monetising non-core mineral exploration assets to fund and grow its Advanced Materials business, in particular the development of its 12CQ room-temperature quantum computing chip and the A1 Biochip.
The sale of the mineral tenements will:
- Partially fund the building of the 12CQ quantum computing chip;
- Allow the company to dedicate additional funds and management to the development and commercialisation of the 12CQ quantum computing chip and its biochip technologies; and
- Enable the company to apply for a change of GICS code to ‘Semiconductors’ and seek admission to the S&P/ASX All Technology Index (ASX:XTX).
Benefit to shareholders
Archer will retain exposure to any exploration success on the NextGen tenements through the royalty, and possible NextGen shareholding should NextGen elect to pay the balance of the purchase price in NextGen shares rather than cash.
Archer shareholders will retain exposure to exploration success by iTech through their iTech shareholding, thus allowing its shareholders to be benefitted from any exploration success on the mineral tenements.
Semiconductor industry
The global market for manufacturing chips is valued at over US$400 billion and, by some estimates is forecast to reach US$1 trillion by 2030.
Chips currently address end markets valued at US$4+ trillion, which include processor, sensor and memory devices.
Archer is building advanced semiconductor devices, including processor chips relevant to quantum computing.
12CQ is a world-first qubit processor technology that Archer is building to enable quantum computing powered devices for mobile and data-centric applications.