Cape Lambert Resources (ASX: CFE) has banked in the remaining $6.5 million for upfront payment relating to the sale of the Sapes Gold Project in Greece to Glory Resources (ASX: GLY), which was acquired by Eldorado Gold Corporation (TSE: ELD).
It had previously received $6,247,500 from the sale of its shareholding in Glory to Eldorado.
Upon completion of the takeover and the receipt of the upfront payment, the company will have unrestricted cash reserves of about $27.9 million.
This includes $5.6 million being environmental bonds associated with the Leichhardt Project that were released to the company in February.
The company had sold 36.75 million shares in Glory at $0.17 each to Eldorado.
"Cape Lambert is in a very strong financial position with no debt and a healthy cash balance that enables the company to maintain its current portfolio and look for distressed assets in the current difficult market," executive chairman Tony Sage said.
Cape Lambert had originally acquired the Sapes Gold Project in Greece in June 2009 before subsequently becoming a cornerstone investor in Glory Resources by selling the project to Glory for a total consideration of A$32,500,000 in cash and 16 million Glory shares.
The completion of the Eldorado takeover and upfront payment validates Cape Lambert's model of acquiring and investing in mineral assets and companies, adding value through a "hands on" approach to management, exploration and evaluation, and monetising the assets.
The company is currently trading at just above 40% cash backing with unrestricted cash reserves of about $27.9 million and a current market cap. of circa $70 million.
Adding further to this, the possible $80 million sale of the Marampa iron ore project in Sierra Leone, which is in escrow pending the outcome of the legal action with Metallurgical Corporation of China Limited, will take the company over its cash backing.
Cape Lambert is also poised to receive substantial royalty income of US$1 per tonne from Exxaro Resources (JSE: EXX), relating to the Mayoko Iron Ore Project in the Republic of Congo.
The Mayoko royalty was negotiated by Cape Lambert as part consideration when it sold its 100% interest in the Mayoko Project to African Iron in January 2011. This was transferred to Exxaro after it acquired African Iron in March 2012.
Mayoko is expected to commence production in the second half of 2014 at a rate of 30,000 tonnes per month rising to 2 million tonnes per annum from 2015 before ramping up to about 10Mtpa from 2019.
Taken together, these developments position the company well for further investments.
Proactive Investors believes that with royalty income commencing and cash levels increasing, investors have an opportunity right now to buy at a discount to the intrinsic underlying value of Cape Lambert. Our preliminary price target is $0.145 - $0.175.
Given that the company has no debt and a history of paying out retained cash in dividends or capital returns, and buying back shares on market - this provides a platform for maximising returns to Cape Lambert shareholders.
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