Australian Strategic Materials Ltd (ASX:ASM)'s South Korean connection is paying dividends with KCF Energy Co. Ltd, a company registered in Seoul and owned by the Korean Consortium, agreeing to invest US$15 million of equity funding and as a result, shares are trading higher.
The Korean company has subscribed for ordinary shares at an issue price of A$8.90 per share.
The KCF equity investment and the revised framework agreement replace the conditional investment of US$250 million for 20% equity interest in Australian Strategic Materials (Holdings) Ltd (ASMH) described in the framework agreement.
Investors have responded positively to the news with shares as much as 31.94% higher intraday to A$6.94.
Offtake agreement on horizon
Negotiations are in progress for a five-year offtake agreement for 2,800 dry metric tonnes of neodymium magnet (NdFeB) alloy from the company's Korean Metals Plant.
The parties are also revising the framework agreement involving ASM, ASMH and KSM Metals Co, Ltd (KSMM), with conditions set out for the Korean consortium to:
- Facilitate a strategic investor to acquire 10% of ASMH shares for US$125 million;
- Make an additional US$105 million equity investment in ASM (which would be subject to shareholder approval); and
- Invest US$50 million via a convertible bond for a 30% stake in KSMM (ASM's subsidiary, which owns the Korean Metals Plant).
This revised framework agreement builds on the relationship established between ASM and the Korean Consortium while providing flexibility for ASM to secure the right strategic partner for its Dubbo Project.
Mine-to-metals strategy
The investments are targeted to occur after the delivery of the milestone work ASM is negotiating with Hyundai Engineering and Construction (HEC).
This work includes front-end engineering and design, early design of key work packages and an open-book project cost estimate. ASM estimates that this milestone work will be completed by mid-2023.
ASM managing director David Woodall said: "We welcome this investment in ASM from our Korean partners as we continue discussions and agree on terms to progress our Dubbo Project and importantly ASM’s mine-to-metals strategy.
“Significant progress in Korea”
“The potential transactions represent a phased investment into ASM, ASM, and KSMM and are an endorsement of ASM's significant progress in Korea.
“This includes the delivery of our first metals plant in Korea, which is an alternative supplier of strategic metals.
“We are pleased to maintain our close relationship with Korea and our partners, who are highly supportive of ASM's mine-to-metals strategy. These partners wish to secure their supplies of the metals needed to drive Korea's manufacturing industry.”