LONDON (Alliance News) - Tengri Resources PLC shares rose on Tuesday after conditionally agreeing to sell its exploration and development operations in Talas within the Kyrgyz Republic for a total of USD6.0 million, but said most of that will be eaten up by paying off its debts.
Tengri shares were up 23% to 2.90 pence per share on Tuesday.
Tengri has signed a conditional agreement to sell the two subsidiaries that own the operations to Socagest SA. Those two subsidiaries are Kami Associates Ltd and Tatianna Ltd, and they hold Tengri's Andash mining licence and the Taldybulak licence.
Those are the only two significant assets to be held by the company, but the two subsidiaries also hold the early-stage Kentash, Korgontash and Barkol licences, which will also be sold as part of the deal.
As the sale would leave Tengri with no significant assets, shareholders will have to grant approval at an extraordinary general meeting on May 9. However, the sale looks likely to be approved as Tengri has already secured irrevocable undertakings from shareholders in the company with a combined 87.3% stake.
Tengri has decided to offload the assets after launching a strategic review of the Taldybulak gold and copper deposit and the Andash project late last year after deciding not to progress them, deciding to look for new opportunities instead.
Tengri wants to find an asset that would require lower start-up costs and a faster route to production than what its current portfolio provides. The scoping study on Taldybulak last year revealed the project would need up front capital costs of USD320.0 million, which was too rich for the company.
Tengri will receive a USD1.0 million deposit once the agreement has been executed, USD4.0 million on completion and the remaining USD1.0 million will be held in an escrow account and paid to Tengri on the second-month anniversary of the completion date, it said.
Importantly, the buyer will also inform Tengri of any liabilities owed by the subsidiaries within 20 days of the deal being completed, with any amounts that need to be settled being taken out of the escrow account.
Tengri said the subsidiaries have outstanding creditor balances of around USD869,976, which will be paid using proceeds from the sale.
As well as clearing those liabilities, Tengri said it will spend USD4.7 million to pay its loan note holders and use the remaining balance to settle all other outstanding matters and retained for working capital.
That suggests a minimum of USD5.6 million will be used to settle current liabilities, leaving Tengri with only a small amount of proceeds.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.