MOD Resources Ltd (ASX/LSE: MOD) $15m Capital Raise & Response to Media Speculation

MOD Resources Limited

Successful $15 million Capital Raise and

Response to Media Speculation

23rd of February Manchester, the McDonald hotel, Manchester, the hotel is situated next less than 300 paces from Piccadilly train station.

Presenting on the night

MOD Resources Limited (ASX/LSE: MOD)

Ticket Link https://www.eventbrite.co.uk/e/share-talk-investor-evening-23-february-2019-manchester-uk-tickets-55126697436 


Highlights:

· Successfully raised $10 million through an oversubscribed institutional Placement at $0.30/sh.

· $5 million to be raised through a fully underwritten Rights Issue at $0.24/sh.

· Confirms strong shareholder confidence in the Company and the quality of the T3 Copper Project

· Received an unsolicited, non-binding, indicative, conditional proposal from Sandfire at $0.38/sh.

· The Board believes this proposal undervalues the Company’s assets

· MOD continues to explore all options including further engagement with Sandfire

MOD Resources Limited (“the Company”) (ASX/LSE: MOD) is pleased to announce that it has received firm commitments to raise $10 million through an institutional share Placement with an additional $5 million fully underwritten Rights Issue to be offered to existing shareholders. The majority of funds are intended for working capital to advance the T3 Copper Project towards production and defining additional resources within the surrounding T3 Expansion Project area.

Furthermore, following media speculation, the Company announces receipt of an unsolicited, non-binding, indicative and conditional proposal by ASX listed Sandfire Resources NL (“Sandfire”) (ASX:SFR). The proposal is to acquire 100% of MOD shares via an all scrip transaction equivalent to $0.38 per MOD share. The Board believes this proposal undervalues MOD’s unique and extensive assets.

MOD’s T3 Copper Project in Botswana lies within a largely under-explored, highly prospective region offering a dominant copper-belt scale opportunity. The T3 Copper Project, discovered in March 2016, presents the potential for a long-life, high-margin, open pit copper mine with significant exploration upside. The Company continues to progress the T3 Feasibility Study to reach a decision to mine in the first half of 2019. The Company has also advanced discussions with a number of parties which has provided the Board with confidence in the availability of a range of funding options to progress the T3 Copper Project into production.

MOD’s Managing Director, Julian Hanna, said “Funding from this capital raise will enable the Company to progress the T3 Copper Project towards a development decision and conduct further drilling for additional resources. The unsolicited, indicative proposal for 100% of the Company received from Sandfire confirms the potential of the T3 Copper Project, however the Board considers it significantly undervalues the assets of the Company. With strong ongoing support of our shareholders through a placement and a fully underwritten rights issue, we believe that the Company will have sufficient working capital to achieve our objectives.”

Successful placement of $10 million with a $5 million Fully Underwritten Rights Issue

The Company is pleased to announce that it has received firm commitments to raise $10 million through the issue of approximately 33.33 million fully paid ordinary shares to institutional and sophisticated investors (“the Placement”). The Placement will be conducted using the Company’s existing Listing Rule 7.1 placement capacity.

The issue price for the Placement is $0.30 per share representing a 36% premium to the Company’s last closing share price on ASX. This indicates strong shareholder confidence in the Company and the opportunity that T3 Copper Project and the regional exploration represents to shareholders.

To ensure that all shareholders can participate in the capital raising, the Placement will be followed by a non-renounceable rights issue to raise approximately $5 million (approximately 21.7 million shares) from eligible shareholders (“Rights Issue”), offering 1 new share per 13 shares held. The Rights Issue is fully underwritten by Ashanti Capital. The Rights Issue will be priced at $0.24 per share, a price that closely reflects the Company’s last closing share price on ASX. Further details relating to the Rights Issue timetable will be released to the market shortly.

The funds raised from the Placement and Rights Issue are intended to be used to complete a 2019 capital works program, which will include:

· Progress the T3 Copper Project through Feasibility Study, mining licence application and early T3 development work to reach a decision to mine, targeted by the end of the first half of 2019;

· Completion of purchase of the farm on which T3 Open Pit is located and construction of initial project related infrastructure;

· Infill drilling to upgrade part of the early stages of T3 mine production to a JORC compliant Measured Resource category;

· Advance conceptual underground mining studies for the T3 Expansion Project and A4 Dome with resource drilling as appropriate; and

· Conduct follow-up drilling of initial, shallow copper and silver intersections at the T4 – T23 Dome.

Funds will also enable the Company to progress negotiations with a number of parties in respect of funding the development of the T3 Copper Project.

The Company’s Board of Directors (“the Board”) and Metal Tiger Plc have committed to take up their entitlements in the Rights Issue.

Ashanti Capital is acting as lead manager and underwriter of the capital raising. Canaccord is acting as co-manager of the capital raising. Blue Ocean Equities provides corporate advice to the Company.

Sandfire Indicative Proposal and Update on Strategic Funding Process

On 16 January 2019, the Company received an unsolicited, non-binding, indicative and conditional proposal (“Indicative Proposal”) from Sandfire to acquire 100% of shares in MOD.

The Indicative Proposal was made after a period of technical due diligence, including access to a data room and a site visit, with respect to a potential joint venture arrangement, the potential sale of a partial interest in T3 Copper Project and a potential market placement to support development of the T3 Copper Project.

The Indicative Proposal comprises a full scrip consideration equivalent to $0.38 per MOD share, valuing the Company’s equity, on a fully diluted basis, at $113 million1. This is equivalent to an exchange ratio of 1 Sandfire share for approximately every 17 MOD shares1.

The Indicative Proposal is subject to conditions, including:

· Completion of definitive due diligence to the satisfaction of Sandfire;

· Execution of a Merger Implementation Agreement;

· Receipt of a unanimous recommendation from the MOD Board;

· Binding commitments or statements of intent by MOD shareholders holding 19.9% or more, in support of the transaction; and

· Sandfire Board approval.

The Board believes that the Indicative Proposal undervalues the assets of MOD:

· MOD holds a dominant position (~11,700km2 in granted licences) in one of the last under-explored sediment hosted copper belts in the world, within a safe jurisdiction2;

· MOD owns 100% of the T3 Copper Project, a high-quality copper development asset;

· Strong exploration results indicate the potential for additional economically viable copper mineralization within several priority targets within MOD’s landholding;

· MOD expects the T3 Copper Project will produce a high-grade, high-quality concentrate, attracting strong interest from metal traders and smelters;

· MOD is on track to release the T3 Copper Project Feasibility Study by end of the first quarter of 2019;

· MOD’s share price and the MOD / SFR exchange ratio are at a 2.5-year low3;

· The last placement price was $0.47 per share4;

· NPV (pre-tax) for the T3 Copper Project based on the PFS is $370m under the Base Case and $529m under the Expansion Case5; and

· The acquisition would be highly accretive to Sandfire in terms of resource, reserve, extended mine-life and NPV per share6.

1 As at close of market on 15 January 2019.

2 Refer to Sprott Capital Partners research report dated 15 January 2019, available at www.modresources.com.au/research_reports

3 Based on closing prices

4 MOD’s $18m placement and rights issue announced on 6 March 2018.

5 Refer to ASX announcement “T3 Pre-Feasibility Study Confirms Robust, Long Life Copper Mine” released on 31 January 2018.

6 Based on average broker NPV.

The Board remains fully committed to act in the best interests of, and to maximise value for MOD shareholders. The Company is willing to engage with Sandfire and grant confirmatory due diligence if a compelling price is presented and capable of being supported by the Board and MOD shareholders.

MOD has not received any offer capable of acceptance by the Company’s shareholders and no certainty that the Indicative Proposal will result in a transaction. The Company will continue to update the market with any material developments in relation to the Indicative Proposal.

The Company has appointed Sternship Advisers as financial advisor and DLA Piper as legal advisor with respect to Sandfire’s Indicative Proposal.


 

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