IMA deal to be brought before shareholders

Published at Aug 27, 2015, in Mining

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.

Location of IMA’s projects in WA

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.

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.

Publishers Notice

The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

Thanks for subscribing!