Mkango Resources Ltd (AIM:MKA, TSX-V:MKA, FRA:ZMK, OTC:MKNGF) is raising £5.2mln and will acquire the remainder of the Songwe Hill rare earths project that it doesn’t already own.
The company is also acquiring all of the Maginito business, which is a rare earth recycling business already part-owned by Mkango, as it seeks to take control of and accelerate an integrated mine, refine, recycle strategy.
It is paying £13mln for the acquisitions, paid in paper to partner Talaxis Limited (part of the Noble Group), with the equity placing set to fund the forward plan which will include the completion of feasibility in early 2022.
"This transaction brings material benefits to both Mkango and Talaxis and strengthens Mkango's position as a future integrated supplier of rare earths,” said Mkango chair Derek Linfield. “We believe this transaction delivers a better platform to create value and a structure more aligned with the strategies of both companies.
“We look forward to Talaxis' continued support as we progress towards development of Songwe Hill and our other projects."
Mkango highlighted that the simplification of Songwe’s ownership structure enhances optionality for Songwe Hill development funding, including the possible introduction of strategic investors and development partners.
With the inclusion of Maginito to the deal, it also give Mkango greater exposure to HyProMag and the rare earth recycling market which management believe offer substantial growth potential.
The transaction itself sees Mkango issue some 54.16mln new shares to Talaxis, which will see the partner and shareholder’s stake in the company rise to 32.6%, from 11.3%.
Talaxis will be given the option to appoint a director to the Mkango board and it has indicated that it will put forward Stephen Motteram for the position.
Motteram, head of corporate development for Noble Group, added in Thursday’s statement: “We look forward to working with management as the Feasibility Study for Songwe Hill and other work streams move towards completion."
“With the increasing electrification of the global economy, Talaxis sees significant growth in the permanent magnet market, especially from EVs and wind power.
“This corporate reorganisation allows Talaxis to better share in the upside from Mkango's integrated Mine, Refine, Recycle strategy.”
At the same time, Mkango is to raise £5.52mln with the issue of 23mln new shares at a price of 24p per share, which marks a premium of 2.9% to the trailing five-day volume weighted average price presently.
The placing proceeds will ensure that the company is fully funded to the completion of the Songwe Hill feasibility study, due in the first quarter of 2022, and also support the Mkango Polska feasibility.
It is expected that a further £1.03mln will be raised after the Talaxis transaction and initial placing have been approved by shareholders.
The £5.52mln placing is due to complete in the coming weeks, with the new shares expected to be admitted for trading by August 17.
An annual general meeting is scheduled for October 6 and it will include a shareholder vote to approve the Talaxis transaction.