IMA deal to be brought before shareholders
Image Resources (ASX:IMA) has been quietly chipping away on a potentially transformative deal for the mineral sands player – and could soon be one step closer to securing a $40 million value package which could see key projects heading towards production.
The WA-based player has been working on a final proposal to take to shareholders since it received approval from the Foreign Investment Review Board for its potential Memorandum of Understanding with Murray Zircon (MZ) and parent company Guandong Orient Ind Sci &Tech Co Ltd (OZC).
The deal centres around IMA’s Boonanarring mineral sands project, prospective for zircon and has probable reserves of 14.4Mt @ 8.3% heavy minerals, with zircon making up a potential 23% of those heavy minerals.
IMA’s Boonanarring reserve is sandwiched between US zircon giant Tronox’s processing plant to the south and its operational site to the north, which produces around 700kt mineral sands concentrate per year.
The operational proximity to Tronox has opened up collaborative possibilities for IMA, so much so that the explorer is now working hard towards bringing the Boonanarring reserve into production in 2016, hence the MOU.
Terms of the MOU
The deal not only provides IMA with the impetus to bring Boonanarring to production, but also secures an offtake agreement (albeit non-binding at this stage) with one of the bigger purchasers of zircon in the world.
Subject to the deal being signed off by shareholders, OZC will purchase 90% of the zircon produced by IMA, giving shareholders certainty over potential cashflow into the future.
More practically, IMA will receive a wet plant and ancillary equipment from MZ to help bring the project to production.
It is thought all up, the potential MOU has a value of $40 million, although this could rise from future offtake.
Other key terms include:
* OZC to provide US$8 million ($A11.23 million) in working capital;
* IMA will receive a conditional loan of $4M from MZ which isn’t repayable if IMA doesn’t get into production within the next three years.
* MZ’s key personnel will contribute their knowledge and expertise on IMA’s projects going forward;
* MZ will receive a 42% stake in IMA which could rise to 47% if all project financing is completed and mining begins within two years. Another positive incentive, and;
* Last but not least, IMA will receive an option to purchase MZ’s dry mineral separation plant.