LONDON (Alliance News) - StratMin Global Resources PLC Friday said it has entered an agreement to sell its graphite operations to its joint venture partner in a deal worth up to AUD15.3 million to the London-listed firm.
The company will sell the its 93.75% stake in Graphmada Mauritius to Australian-listed Bass Metals, subject to shareholder and regulatory approval.
Bass Metals already owns the other 6.25% of Graphmada, which homes StratMin's graphite operations in Madagascar, and wants to fully acquire the company so it can independently fund its development and expansion.
StratMin had previously struck a deal to allow Bass to increase its stake in Graphmada from its 6.25% stake, which it paid GBP500,000 for, up to 25% for a consideration of GBP2.0 million - but this agreement is now void and has been replaced with the new deal.
StratMin said it had recieved interest from a number of parties about buying Graphmada, but said Bass was its preferred purchaser as it is already invested in the business.
The AUD15.3 million consideration to be paid by Bass for the 93.75% stake values Graphmada at a total of AUD16.3 million, roughly GBP8.6 million, which StratMin said was a "reasonable control premium" to the GBP8.0 million valuation of the business in early September last year and a "compelling valuation" in comparison to the current market capitalisation of the company.
StratMin shares were trading up 13% to 3.10 pence per share on Friday morning, giving it a market cap of around GBP5.7 million.
Breaking down the consideration, Bass will make a cash payment of AUD1.5 million, roughly GBP795,000. Bass will also make an equity payment of AUD8.8 million in shares, which will be issued over three tranches.
Bass will issues shares to StratMin worth AUD750,000 once the deal has been executed, whilst the remaing shares will only be issued once the graphote operations have hit certain milestones.
Once production has been maintained above 1,250 tonnes of graphite concentrate for three consecutive months, Bass will issue a second tranche of shares to StratMin worth AUD3.0 million, followed by a further tranche of shares worth AUD5.0 million once production has exceeded 2,500 tonnes over three consecutive months.
To put that into perspective, Bass' mid-market share price on the ASX was AUD0.009 at the close of trading on Thursday.
StratMin said it has purposely negotiated the consideration to be weighted more towards equity than cash to "optimise the economics of the transaction" which will enable the company to pursue other corporate activities whilst retaining an interest in the graphite operations.
Bass will also pay a net smelter royalty fee of 2.5% to StratMin, capped at AUD5.0 million, starting six months after the deal has been executed.
Although StratMin believes the deal provides the best way forward to maximise value for shareholders, it leaves the company without an asset. Under AIM rules, StratMin will have six months to find another asset, or it will have to readmit to AIM as an investment company, which in turn would only give it a year to implement its investment plan.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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