LONDON (Alliance News) - Finnaust Mining PLC reached a watershed moment on Wednesday after the self rule government of Greenland awarded its first ever licence for mineral exploration within shallow waters offshore the coast, providing a pathway for the miner's titanium development.
The licence has prompted FinnAust to raise GBP500,000 so it can now accelerate work on the Pituffik titanium project and, more notably, so the company can pursue "potential acquisitions".
Greenland has been ruled by Denmark for the last three centuries but the country has been slowly pulling away and becoming more independent, securing self-rule in 2009 following the limited sovereignty granted by Copenhagen back in 1979.
Greenland has historically been heavily reliant on subsidies from Denmark, which still controls the country's major policies, but Greenland is seen as a potential haven for natural resources and the government hope to exploit the vast amounts of oil, gas, gold, diamonds and other metals that lie underneath the country and its waters.
Previously, resources have been inaccessible because of the Arctic ice that covers most of Greenland's land mass, but climate change is helping to reduce the amount of ice and boosting access.
Pituffik, for example, was found way back in 1915 but has only recently be a viable project over the last 15 years due to the impact of environmental changes in the country.
The project contains deposits lying within raised and normal beaches and, in a rare occurrence for a mining project, deposits lying in drowned beaches covered by shallow water as far out as 1.0 kilometre from the shore.
When the London-listed miner originally struck the deal to acquire the project in 2015, the licence over Pituffik only covered the onshore ground area and FinnAust immediately took action to extend it to cover coastal and offshore areas that it knows already contains mineralisation.
Although agreed in late 2015, the deal was only formally completed in March this year after the pair received approval from Greenland regulatory authorities which had previously held up the deal.
The licence has also taken longer to be approved than planned, but that is understandable especially as it was the first licence to be awarded of its kind.
FinnAust believes the shallow offshore areas contain ilmenite bearing sediments similar to that found onshore - but at "much larger volumes" - making the expanded area significant for the miner.
Ilmenite is the most important ore of titanium after surpassing rutile as the main ore mineral of the metal.
The sediments found offshore range in thickness from 3.0 to 27.0 metres, averaging at 5.0 metres, but more importantly, the licence has provided FinnAust with a "clear permitting pathway" for the project as a whole, it said.
To put the expanded area and significance of the shallow areas into perspective, half of the 150.0 square kilometre licence now covers marine locations, significantly boosting the volume of titanium-bearing sediments contained in the area.
"This is a watershed moment. We now control all prospective sediments both on and offshore at Pituffik," said Chief Executive Roderick McIllree.
To speed up development and exploration at Pituffik, FinnAust has raised GBP500,000 through a placing of 10.0 million new shares priced at a 2.4% discount of 5.0 pence per share with new and existing investors.
The shares issued represent around 2.0% of the enlarged issued share capital of the business.
"With the offshore licence now secured, the funds raised will be used towards implementing an accelerated work programme at Pituffik as well as undertaking due diligence activities on potential acquisitions," said FinnAust.
FinnAust has previously aimed to complete a maiden resource estimate for the project during this year, leading to a bulk sample being produced in 2017, but it is unclear whether this timeline has changed following the update on Wednesday.
The miner appointed Royal IHC to provide support services to Pituffik last month, and the priority is to define an optimised development plan for the asset.
FinnAust acquired the Pituffik project by acquiring a 60% stake in the company that holds the licence, BlueJay Mining Ltd. FinnAust acquired the stake in an all-share deal, but is due to issue further shares to the vendors once certain conditions have been met.
Notably, FinnAust Chief Executive Rod McIllree and Non-Executive Director Greg Kuenzel are some of the vendors in question.
FinnAust will have to issue the deferred shares agreed under that deal after securing the exploration licence on Wednesday. The miner is due to issue 40.8 million shares to the vendors of BlueJay - but that will not happen right away due to the terms of the deal.
"The granting of the marine based exploration licence at Pituffik has satisfied condition one above. However, at this point in time the issue of the deferred consideration shares would trigger a mandatory offer by the vendors of BlueJay pursuant to Rule 9 of the Takeover Code," said FinnAust.
"The company will only issue the deferred consideration shares to the vendors of BlueJay once any Rule 9 obligation as a result of the issue of the deferred consideration shares ceases to exist," FinnAust added.
FinnAust shares initially reacted well to the update on Wednesday, rising 12% to reach a day-high of 5.72 pence, but later Wednesday afternoon FinnAust shares were only trading up 1.3% to 5.19 pence.
FinnAust is currently trading more than 3.1 times higher than at the start of 2016 and almost 4.0 times higher than a year ago.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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