East Energy Resources (ASX: EER) is moving closer to the $40 million acquisition of Idalia Coal from Noble Group and Majicyl Pty Ltd with completion of due diligence and the execution of a share purchase agreement.
The deal values the combined entity at $73 million and combines East Energy's 1.74 billion tonne Resource with Indalia's 440 million tonne Inferred Resource and drill identified exploration target of between 4 billion and 4.5 billion tonnes.
The new assets are located along strike of the company's current deposits which contain the resource.
East Energy will acquire 100% of Idalia by offering the equivalent of $40 million in new shares priced at $0.20 each to Noble and Majicyl.
Noble currently holds 50.1% of Idalia and Majicyl holds 49.9% of Idalia. Following completion of the Transaction, Noble and Majicyl will hold 41.18% and 45.98% of the issued shares of East Energy, respectively.
Under the deal, East Energy will add EPC 1398, EPC 1399, and EPC 1400 - all of which sit adjacent to the company's current tenement.
Together with East Energy's assets, these tenements will provide the foundation for the development of rail and port infrastructure, able to support a large scale mining operation in western Queensland.
East Energy will hold its General Meeting of in April for shareholders to vote on the proposed acquisition of Idalia.
Noble Group re-financing arrangement
Noble will also provide East Energy with a debt re-financing arrangement to repay the full debt that East Energy owes to Idalia under the facility agreement between the two companies.
The arrangement will also provide additional funds to Idalia to fully repay its loan to the Noble Group.
The final amount to be refinanced will be determined on the business day immediately preceding the close of the transaction.
Post the repayment of the East Energy facility, the Idalia loan and payment of any relevant stamp duties associated with the transaction, East Energy will have a further $5 to $6 million available for draw down and working capital purposes under the debt re-financing arrangement.
The completion of due diligence and the execution of a share purchase agreement formalises a deal that will provide the company with one of the largest coal portfolios in Australia. This should assist to provide the scale to develop the resources.
With Noble Group holding 41.18% of East Energy after this deal, it is incentivised and aligned to assist in potential development and financing options alongside East Energy.
With the tenements being acquired along strike from East Energy's Blackall Coal Project tenement, this will likely add more significant resources and value to the project.
Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.