Astro Resources NL (ASX:ARO) has updated the market on its activities, including plans to spin off its diamond assets comprising its East Kimberley project and a collection of other projects in Australia and potentially overseas, via an initial public offering (IPO) on the Australian Securities Exchange.
Further, the company is in talks with Pediment Gold LLC, a wholly-owned subsidiary of Nevada Exploration Inc, for a potential strategic alliance, to work together to identify, review and advance epithermal gold targets in Nevada.
Planning is also progressing for the drill program to update the Jack Track resource, which sits within the company’s Governor Broome Mineral Sands project in WA.
The company has also been approached by third parties in relation to funding, joint-venture opportunities and the possible sale of the Governor Broome Project.
Astro Resources has also been granted a trading halt today pending the release of an announcement.
Diamond project spin-off
The board believes that the spin-off into a special purpose vehicle dedicated to diamonds, with a clear focus and its own management team, is in the best interests of Astro’s shareholders.
It is envisaged that the spin-off will occur via Astro’s recently incorporated subsidiary, Argyle Resources Ltd.
Astro shareholders would be provided a priority allocation in the IPO while the company would retain a minority shareholding in Argyle, based on the value of its East Kimberley project.
The company plans to complete and finalise the IPO, including a fund-raising process by the end of the second quarter/early third quarter of 2022.
This IPO is subject to Argyle meeting the conditions of admission set by the ASX.
The company will provide further particulars on the assets to form part of the IPO as plans for the proposed spin-off progress.
Nevada investment opportunities
Talks with Pediment Gold are likely to involve Astro contributing around US$1.5 million or A$2.0 million over a two-year period to earn a 70% interest in a special joint venture company (SPV), and Pediment holding the balance 30% interest in return for contributing one or more of its current or future epithermal gold targets.
The SPV would be expected to hold a 90% (Pediment would own the other 10%) to 100% interest in projects advanced under the alliance.
Present discussions involve Pediment’s gold project in Slumbering Hills, Humboldt County, Nevada, but no project has been agreed.
At the end of the two-year period, Astro would be able to review its position in the SPV, with one of the options available to Astro being to terminate.
Alternatively, it is anticipated that Astro may remain in the SPV but elect not to participate in future funding of the joint venture and thereby dilute its interest in the SPV, or Astro may elect to continue to provide some level of funding having regard to the exploration results achieved by the end of the two-year period and the business plan and funding requirements of the SPV having regard to those results (as determined by SPV board).
The decision of whether or not to terminate, remain in the SPV, or participate in future funding of the SPV (including, if applicable, the funding level) will be at the absolute discretion of the Astro board.
Astro is expected to have board control of the SPV during the two-year period, while Pediment will provide the operational and project generation support for the SPV as the main operator of the SPV's projects.
Pediment has an experienced technical team located in Reno, Nevada, which Astro believes could help support the company’s work at Needles.
The proposed alliance and investment in the SPV is expected to be complementary to the Needles Project.
An investment of A$2.0 million in the SPV is not expected to result in a significant change in the nature or scale of the company’s activities for the purposes of Chapter 11 of the ASX Listing Rules.
Negotiations remain incomplete and are subject to:
- Due diligence and final board approval;
- Legal documentation; and
- Regulatory approval, including compliance with Chapter 11 of the Listing Rules.
Further updates, including the expected time frame for its completion, will be provided as and when available.
Governor Broome Mineral Sands Project
Astro has been continuing its drill planning work for the proposed resource upgrade in the Jack Track deposit, which included obtaining land access agreements and other permits.
The company has also been completing certain aspects of the transaction, including the payment of the Western Australian stamp duty on the acquisition of the Jack Track deposit.
Astro also noted that it has had a number of approaches over its Governor Broome Project and that these discussions are in all a very early stage, with parties in an exploratory stage of dialogue.
It will provide further updates as and when available.
Cash balance
As at December 31, 2021, the company had a cash balance of $869,901, with all payments to third parties largely up to date, except for work done on drill hole number 2 in the Needles Project.
The existing cash reserves are considered to be sufficient in meeting the balance outstanding for the Needles Project drill campaign.
Further funding
Based on a high-level review of its cash requirements, including the Nevada Project drill campaign, the board considers that further funding will be required for the forthcoming Jack Track drilling campaign.
Accordingly, it will be engaging with interested parties with respect of a future placement of shares to further fund its activities.
Further details of any proposed capital raising will be communicated to shareholders, as and when they are confirmed.
Trading halt
At the request of the company, its shares have been placed in a trading halt pending an announcement.
The reason for the trading halt is the pending release of an announcement of a proposed capital raising.
Shares will remain in trading halt until either the commencement of normal trading on Wednesday, January 19, 2022, or when the announcement is released.