Southern Gold Limited (ASX:SAU) has been issued 150 million shares in London Stock Exchange (LSE)-listed Bluebird Merchant Ventures (BMV) to finalise the sale of equity interests in two South Korean properties.
The shares were passed on to Southern Gold’s wholly-owned Singaporean subsidiary, International Gold Private Limited (IGPL), after the ASX-lister agreed to sell its interest in the Gubong and Kochang properties.
The ordinary shares should hit the board in the UK from 8:00 am tomorrow after BMV’s prospectus got the green light from the UK Financial Conduct Authority last Friday.
Speaking to the finalisation, Southern Gold chair Greg Boulton said: “As a major shareholder in BMV, we are pleased that the sale of our interests in the Gubong and Kochang are finalised to enable BMV to pursue options to finance the development of gold mining in South Korea.”
Background
Back in late June, Southern Gold’s subsidiary, IGPL, held a 50% interest in two incorporated joint ventures covering the Gubong and Kochang projects in Korea.
The other 50% stake was held by Bluebird Merchant Venture, which elected to acquire the 50% interests held by SAU’s subsidiary when it did not support BMV’s proposed decision to mine for each project in mid-2020.
On June 29, Southern Gold and BMV executed a definitive agreement to settle the matter.
In exchange for IGPL’s joint venture interests, BMV looked at two options.
First, it could issue 200 million BMV shares to IPGL at US$0.05/share, or issue between 50 million and 200 million shares and pay IGPL US$0.05 for every BMV share it did not issue, valuing the deal at US$10 million.
At the time, the deal value was equivalent to roughly A$0.062 per Southern Gold share.
“Valuable equity interest”
Speaking to the agreement in June, Southern Gold managing director Simon Mitchell said: “Southern Gold has effectively agreed to a share swap deal where we will exchange our subsidiary’s 50% interest in the two joint ventures for an approximate 30% interest in BMV once all shares are issued.
“The value of this position will be more easily ascertained by investors, given BMV’s listing on the LSE, with a current deal value of approximately A$13.2 million at current exchange rates.
“In other words, the value of the shareholding in BMV will constitute more than 200% of our A$5.9 million enterprise value, given our March 31, 2021, cash balance of A$9 million and market capitalisation of A$14.9 million.
“The BMV shareholding will be a very valuable equity interest and I expect it to significantly increase in value as BMV advances the Kochang and Gubong projects towards their stated near-term objective of gold and silver production.
“As a new and significant shareholder of BMV, our current intent is not to sell small parcels of shares into the market, which would be detrimental to the share price, but to allow the company to grow and advance into its next stage of development."