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  • World Titanium Resources Raises $3.17M, Over 90% Take Up To Issue 0 comments
    May 6, 2013 10:06 PM

    World Titanium Resources (ASX: WTR) has raised $3.17 million from its fully underwritten non-renounceable pro-rata entitlement issue with shareholders taking up over 90% of the shares on offer.

    "The directors are very pleased with the level of support shown by shareholders, with over 90 per cent of the issue taken up, which reflects the quality of the Company's Ranobe Project and the progress made in securing funding for its development," chief executive officer Bruce Griffin said.

    The shortfall of 1.8 million shares priced at $0.17 each will be placed with the underwriters. World Titanium shares were last trading at $0.24.

    Proceeds will be allocated to geotechnical studies for port and road, sample analysis and processing, and permitting and approvals for the Toliara Sands Project in Madagascar.

    World Titanium had offered 18.6 million shares to shareholders in the entitlement.

    Investor interest strong

    Investor interest has been strong in World Titanium recently rising sharply in mid-March to $0.24 from $0.17 and staying near this level since then.

    It has also gained Blakeney LLP and JP Morgan as substantial shareholders.

    This reflects the size, the grade and value accretion of the proposed transaction with Sichuan Lomon Titanium, a major Chinese titanium dioxide pigment producer.

    Under the deal, Sichuan Lomon Titanium will contribute the US$300 million capital required to develop an 800,000 tonne per annum ilmenite mine at the Tier 1 project.

    The joint venture would secure all funds required for a much larger initial development at Ranobe, and eliminate the need for World Titanium to raise any development equity or debt capital.

    It would also secure an offtake commitment for 80% of the ilmenite that the mine would produce, sufficient to cover all operating costs in almost any price environment.

    This dramatically reduces the financing and offtake risk for the project.

    The joint venture will be formed by Lomon acquiring 50% of World Titanium's wholly-owned Mauritian subsidiaries, which hold the Ranobe mining and exploration licences, and the other Toliara Sands Project exploration licences at Ankililoaka, Basibasy and Morombe.

    On signing of the definitive deal documents following the due diligence period, Lomon will also subscribe for 43.25 million World Titanium shares at the 30 day VWAP to raise up to A$8.2 million.

    The first of the Lomon Due Diligence teams arrived on site in early April and have commenced work.

    Toliara Sands Project progress

    World Titanium continues to progress work at the Toliara Sands Project.

    A drilling barge and rig required for the jetty geotechnical survey have been mobilised to Toliara and should complete the planned drilling program during the current quarter.

    Detailed design work for the jetty will be completed and the cost estimate updated once all survey data has been acquired and incorporated.

    Assays from a 362 hole, 8,000 metre drilling program at Ranobe are expected during the June 2013 quarter.

    World Titanium had also completed in the March 2013 quarter, a second trial mining pit to expose the limestone basement at a depth of about 16 metres.

    The front loader and excavator used for the trial continued to experience no difficulties extracting the sand and the pit walls were stable indicating that a simple and safe front end loader dry mine using benches can be designed.

    It has also completed required specialist studies including Fish, Marine and River, Social and Economic, Flora, Fauna, Waste, Noise, Air Quality, and Offset and Rehabilitation.

    Draft Environmental & Social Impact Assessment (ESIA) and Social & Environmental Management Plan (SEMP) were submitted to the Office National pour L'Environment (NYSE:ONE) early in the current quarter.

    Following-on from these submissions, the public consultation process for the ESIA started at the beginning of April. Once the consultations are complete in May the final ESIA and ESMP will be submitted to ONE and the final approval process will commence and is expected to take up to 6 months to complete.

    The Toliara Sands Project hosts a Resource of 959 million tonnes at 6.1% total heavy mineral, including a 161 million tonne Reserve at 8.2% total heavy mineral, at Ranobe.

    The exploration permits at Ranobe, Ankililoaka, Basibasy and Morombe contain a total exploration target in excess of 4.7 billion tonnes of mineralisation.

    Sichuan Lomon Corporation

    Sichuan Lomon Corporation, the parent of Sichuan Lomon Titanium, is a private Chinese company operating four businesses: phosphate fertiliser, titanium dioxide pigment, vanadium-titanium-iron ore mining and processing, and bio-technology.

    Lomon's unique integration of phosphate fertiliser and titanium pigment production reduces the cost typically associated with waste disposal from sulphate titanium dioxide pigment production and makes them one of the lowest cost producers of titanium dioxide pigment in the world.

    Its products have a reputation for quality and are sold to customers in China and around the world.

    Lomon operates two existing sulphate pigment plants with a combined capacity of 300,000tpa of titanium dioxide pigment and has plans to expand the plants. Lomon's current ilmenite feed requirements of 750,000tpa are met from their vanadium-titanium-iron ore mining and processing business.

    Analysis

    The strong take up of World Titanium Resources' fully underwritten entitlement issue highlights the relative attractiveness of its Toliara Sands Project.

    Following receipt of funds from the issue, the company will have about $5.7 million in cash.

    In the current challenging capital market environment, the prospects to snare a major Chinese titanium dioxide pigment producer to shoulder the costs of developing an expanded project - eliminating the need for the company to raise any development equity or debt capital - and offtake 80% of the ilmenite that the mine - is exceptional in our experience.

    The Toliara project is one of those rare Tier 1 projects that a "major" would wish it owned. The long life, projected high operating margins and relatively low development capital compared to similar scale mineral sands projects hold the key.

    For investors, funding from Lomon (DD concludes mid-June) would set the seal without the need to go back to investors or even recourse to debt markets and provide a potential fast track to production. An announcement of funding from Lomon would see this stock fly but more importantly provide one of the best global mineral sands counters for medium to long term growth.

    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.

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