Artemis completes acquisition of Fox Resources’ WA mining assets

By Trevor Hoey. Published at Apr 28, 2017, in Small Caps

Through finalising the acquisition of Fox Resources assets, Artemis Resources (ASX:ARV) has completed the purchase of the Radio Hill nickel/copper/cobalt metallurgical plant, the Radio Hill Mine and its JORC compliant resource base held within a 495 square kilometre tenement package in the Pilbara Region of Western Australia.

While ARV has acquired all of Fox Resources’ Western Australian mining and exploration assets for 28 million Artemis shares (at 10 cents), the company has also assumed the remaining liabilities of approximately $920,000, equating to an effective purchase price of $3,720,000, not including the additional $100,000 the company was required to pay in order to close the transaction by the end of April.

Consequently, this is slightly below the revised purchase agreement of $2 million and the issue of 20 million Artemis shares (not including the assumption of remaining liabilities), equating to $4 million.

However, the initial agreement which was struck on December 16 required the payment of $3.3 million plus $200,000 in fees, but excluded ARV assuming Fox Resources’ liabilities.

Acquisition of Radio Hill assets strategically valuable for Artemis

Despite the variations in consideration for the acquisition of Fox Resources’ assets over the last four months, there is no doubting their strategic value and the inherent savings that have been realised when compared with the costs involved in establishing new infrastructure from the ground up.

The acquisition of Fox Resources’ assets is part of the company’s strategy of creating a “Hub and Spoke” operation for the first time in the Karratha area with the aim of establishing a multi-metal production company and unlocking the growing cobalt, copper, nickel, zinc, gold, palladium, platinum and iron ore potential of the region.

ARV’s executive chairman, David Lenigas, also highlighted that ownership of these assets should add significant value to the potential development of the group’s Carlow Castle cobalt discovery.

He also noted that the significant tonnages of waste rock stockpiles at Radio Hill could also prove valuable as pre-mined quarry material for the new road and infrastructure works planned for the region over the coming years.

It should be noted that ARV is an early stage play, so seek professional financial advice if considering this stock for your portfolio.

Overseas institutional support for funding arrangement

ARV has opted for funding which will minimise earnings per share dilution with the company entering into an US$2million (~A$2.66million) funding agreement by way of the issue of Convertible Securities with an aggregate face value of US$2 million with a consortium of investors arranged by London based institution Riverfort Global Capital Ltd.

As well as providing funding for the Radio Hill acquisition, the agreement will provide working capital for a significant long-term asset and assist in the continued growth of the business of the company.

The Convertible Securities have a fixed conversion price of 12 cents per fully paid ordinary share, and are subject to certain conditions in the funding agreement and compliance with the ASX listing rules at the funder’s election.

ARV will not be obligated to make repayments during the first two months, and if the group’s share price is below 12 cents per share for any month of the loan period between the third month and the 16th month ARV can elect to make the repayment for any month in cash at 115% of the monthly redemption amount.

At ARV’s discretion, it can pay the monthly repayment in shares calculated as the lower of the 12 cents fixed conversion price or at 93% of the lowest daily volume weighted average price during the 10 trading days immediately prior to the monthly conversion notice date.

ARV will also issue the investors with 4.4 million options at an exercise price of 15 cents per share with an expiry date of three years from issue date and 4 million ARV shares as collateral to secure ARV’s obligations under the funding agreement.

It should be noted that share trading patterns should not be used as the basis for an investment as they may or may not be replicated. Those considering this stock should seek independent financial advice.

These securities were issued under the company’s existing 15% capacity in terms of Listing Rules 7.1, dispensing with the need for shareholder approval.

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S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

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