Proceeds from the note will used to complete the maiden Coal Resource estimate for Titiribi Coal Project in Colombia, advancing the Scoping Study and for general corporate and working capital.
"Entering into a financial agreement of this nature with a counterparty of the calibre of Resource Capital Funds is further evidence of the quality of the company's Titiribi coal project," managing director Andrew Caruso said.
"RCF is a world-renowned and respected specialist mining investor. In addition, the company was pleased to have negotiated the term sheet on favourable terms, particularly against the backdrop of challenging market conditions currently faced by junior resource exploration and development companies."
Ascot had recently revealed its plans to fast track development of the Titiribi coal project in Colombia.
Titiribi, which was acquired in mid-2012, is located in an established mining region within the State of Antioquia, Colombia only 70 kilometres from the State Capital Medellin, 10 kilometres from the town of Titiribi and close to all existing utilities and infrastructure.
The Note is to be convertible at RCF's election into ordinary fully paid shares in the Company at a conversion price of A$0.18 per share, representing a 25% premium to the last traded price of $0.145 per share.
Ascot has undertaken to obtain requisite shareholder approvals to enable conversion within three months of the issue of the Note, otherwise the Note becomes immediately repayable.
It also has the ability to redeem the note on or after 9 May 2014 by giving the requisite notice to RCF.
The Note carries a coupon rate of 14% per annum, payable quarterly in arrears.
At the company's election, coupons may be paid in the form of AZQ shares, cash or a combination of cash and shares, with any shares issued being priced at a 5% discount to prevailing market prices.
Resource Capital Funds
Resource Capital Funds is a mining focused private equity firm that has been actively investing in the sector since 1998.
Over the last fifteen years, the funds have made investments in about 113 mining companies, with projects in 39 countries and exposure to 28 different mineral commodities.
RCF offers a global reach with primary offices in Denver, Colorado, and Perth, Australia, with satellite offices in New York, Toronto, and a London representative.
It is a long term investor, typically supporting portfolio companies and advancing projects for a four to seven year period.
Titiribi Coal Project
Ascot has a 90% interest in the Project, which consists of 3 mining licences with an option over three more adjoining concessions that in total cover about 700 hectares within a region that hosts a number of coal bearing formations.
Ascot had expanded its Phase 1 drilling program that it started in January after continued intersection of significant coal seams within the El Balsal and El Silencio licence areas.
Significant coal intersections include cumulative thicknesses of 7.3 metres, 13 metres and 9.5 metres.
The 14 well program - up from the original 10 - will allow the company to more accurately correlate the multiple coal seams encountered within the concession areas and confirm their continuity.
This will in turn assist the company in delivering a mine planning study that is currently being undertaken as part of its overall Economic Study for the Titiribi Project.
The release of an initial Coal Resource estimate is targeted for the next quarter.
Coal testing has highlighted the potential to produce a premium quality coking coal product, with low impurities. Further testwork will be carried out to determine the coal's coking (metallurgical) properties.
Once the coal quality analysis is complete, Ascot will assess the potential marketability of the coal in both local and export markets.
Ascot is trading at above 35% of its 31 March 2013 cash backing of $1.55 million, or $0.05 per share. Its current market capitalisation is $4.32 million with a share price of $0.145.
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