MOD Resources Ltd (ASX: MOD) said it has entered into a binding Share Sale Agreement (SSA) to divest its Sams Creek Gold Project (Sams Creek Project) in New Zealand to Condamine Resources Ltd (Condamine), for a total consideration of A$3.8 million (Sale). Condamine is a newly incorporated company that intends to complete an IPO to list on the ASX during this calendar year.
On successful completion of the Sale, MOD will receive cash proceeds of A$1.75 million and 10.25 million shares in Condamine at a minimum issue price of A$0.20 per share for a total consideration of A$3.8 million. MOD’s interest in Condamine’s post IPO issued capital could be up to 15%.
The Sale is consistent with MOD’s focus on developing its portfolio of copper assets in Botswana, where it is aiming to become a long-life copper producer. The SSA covers the Sams Creek Project, including EP 40338 (80%) and EP 54454 (100%). OceanaGold Corporation (TSX/ASX: OGC) (OceanaGold) holds the remaining 20% in EP 40338 through a joint venture with MOD (Joint Venture).
The Sale is subject to a number of conditions precedent (refer to Annexure A) including the transfer and assignment of OceanaGold’s interest in the Joint Venture on terms acceptable to Condamine and conditional upon the quotation of Condamine shares on the ASX.
It is anticipated that MOD shareholders will receive a priority offer for shares in Condamine as part of Condamine’s IPO. Further details will be outlined in Condamine’s IPO prospectus which is currently due for release in August 2017.
MOD’s Managing Director, Julian Hanna, considers the Sale will represent a good outcome for shareholders and should enable the management team to put all its energies into Botswana.
“The SSA provides the opportunity to monetise the Company’s non-core gold assets by divesting them to a new, dedicated New Zealand-focused gold exploration company,” said Hanna.
“This transaction has the additional benefit of preserving MOD shareholders’ exposure to an excellent gold project which has significant upside. We look forward to supporting Condamine through the IPO process,” he said.
Funds from the Sale are expected to be used to retire MOD’s debt (currently A$1.0 million), and contribute to expanding exploration and development activities at the Botswana Copper Project. PCF acted as lead adviser to MOD and Paloma Investments is the lead advisor to Condamine and its anticipated IPO.