World Titanium Resources edges closer to funding JV with Sichuan Lomon
World Titanium Resources (ASX:WTR) has revealed it will put a revised MoU with China's Sichuan Lomon Titanium for funding of the Tier 1 Ranobe mineral sands mine in Madagascar to shareholders for a vote.
This follows an earlier MoU in which Lomon would fund 100% of capital to achieve 800,000 tonnes per annum procution by 2018, Lomon would acquire 50% of Toliara Project.
The revised MoU provides the basis for definitive documentation of a 50:50 Joint Venture for the construction and operation of an 800,000tpa sulphate ilmenite mine at Ranobe, in south-western Madagascar.
The WTR board unanimously agreed to submit the unsigned revised MoU to WTR shareholders for their approval or rejection however a majority of the WTR Board did not approve the revised MoU in its current form.
Key points of revised MOU:
- Lomon will contribute the first US$200 million of the capital required to develop an 800,000 tpa ilmenite mine at Ranobe;
- If required, capital in excess of US$200 million and up to US$300 million will be provided by project debt which will be secured by 100% of the project’s assets. The project debt will be serviced from Lomon’s share of operating cashflows. Any capital expenditure above US$300 million will be jointly funded by WTR and Lomon;
- For providing the above funding Lomon will acquire a 50% interest in the Ranobe mining and exploration licences and WTR’s other Toliara Sands Project exploration licences;
- A capacity test at a rate of 800,000tpa of ilmenite, will be made at the end of 2018 and will determine Lomon’s final ownership in the JV;
- Lomon will have both the obligation and right to buy 80% of the ilmenite from Ranobe at a 5% discount;
- The date to approve construction will be the later of 31 March 2014 or 14 days after development approvals are secured from the Malagasy government;
- Lomon will appoint two directors to the WTR board;
- WTR will use reasonable endeavours to hold a General Meeting within 60 days;
- Should WTR shareholders approve the transactions proposed in the Amended MoU Lomon and WTR will agree and execute the necessary definitive agreements within 60 days;
- Lomon will acquire a total interest of 26% of WTR post completion by acquiring 38,888,124 WTR shares from existing shareholders (12.27% of the existing WTR shares); and
- 43,250,000 shares issued by WTR priced at the 30 day VWAP prior to the definitive documents being signed up to a maximum of A$0.19 as per the original MoU; and an additional issuance of 15,579,174,or such number for Lomon to own 26% of WTR, at A$0.275 per share.
The target date for the start of construction will be the later of 31 March 2014 or 14 days after the development approvals are secured from the Malagasy government.
Lomon will be have the right to nominate 2 directors to the WTR Board upon completion of the transactions proposed in the Amended MoU so long as it maintains a 15% holding in WTR and a 20% holding in the JVCos.
Lomon will retain the right to nominate one WTR director so long as it maintains a 10% holding in WTR and a 20% holding in the JVCos.
Amended MOU not signed by WTR Board
A majority of the WTR Board did not approve the revised MoU in its current form or its execution unless approved by shareholders. The reasons for this were:
- the effect of a signing the Amended MoU before shareholder approval would have been to bind WTR to its terms, including:
- Exclusivity, preventing the WTR from considering other transactions or offers (other than a takeover offer) without Lomon’s prior consent without an equal restriction on Lomon (Lomon limited to ilmenite transactions in Madagascar);
- Confidentiality, including prohibiting the WTR from providing copies of the Amended MoU to its shareholders without Lomon’s prior consent;
- Limiting WTR’s ability to raise funds without Lomon’s prior consent (WTR prohibited from issuing more than 5 million shares before the General Meeting); and
- Binding, neither Party could walkaway. This would prevent material changes to the MoUafter the dispatch of the Notice of Meeting to shareholders reducing the risk that any shareholder approval obtained would be invalidated.
Should WTR shareholders approve the transactions proposed in the Amended MoU Lomon and WTR will seek to agree and execute the necessary deal documents within 60 days of the date of shareholder approval.
Shareholder Approval and Completion
WTR will use reasonable endeavours to hold a General Meeting within 60 days of the Amended MoU to consider and approve or reject all the transactions proposed in the Amended MoU(i.e. by 20 August 2013).
WTR owns 100% of the Tier 1 Toliara Sands Project in Madagascar, which includes a Mineral Resource of 959Mt grading 6.10% total heavy mineral (THM) at Ranobe including a 161Mt Mineral Reserve at an average grade of 8.20% THM.
The Ranobe Mine is a large, scalable mineral sands asset, with relatively simple & low-risk development, and blessed with high margin, robust NPV and mining licences in place.
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