Ironbark Zinc (ASX:IBG) has secured a US$50 million convertible note funding facility and offtake facility with a Glencore International (LSE:GLEN) subsidiary that allows Ironbark to add to its considerable base metals assets when opportunities are available.
Ironbark is currently concluding a Feasibility Study for the Citronen project, a globally significant base metal project in Greenland.
The facility has been struck by Ironbark managing director Jonathon Downes at a level that provides for conversions to shares at a significant premium to Ironbark’s last traded share price of A$0.30.
The funding facility could see Ironbark expand to become a significant base metals house with this further backing from Glencore.
Following shareholder approval, Ironbark plans to use the funds to acquire assets, at either a project level or a company level, which are identified and agreed upon between Ironbark and Glencore, and for working capital.
Opportunities for acquisition may include assets or companies that have base metal assets in jurisdictions where Ironbark does not currently operate, which would provide Ironbark with diversification by operation, commodity and geography.
The company believes this type of diversification has the potential to deliver significant net benefits to Ironbark.
The timing of the facility is particularly favourable for the company, with global financial uncertainty resulting in growing opportunities for well-funded companies to expand through inorganic growth.
The majority of the Ironbark board believes that the ability to offer significant cash consideration to secure base metal project(s) is highly valuable in the present market.
The benefits of increased scale and project diversification as a result of successful acquisitions funded by the facility could also result in Ironbark’s cost of capital for future funding being improved.
The facility will be provided in two tranches of convertible notes with minimum drawdown amounts of $5 million.
Tranche 1 comprises $30 million which may be converted into Ironbark shares at the election of either Glencore or Ironbark at A$0.42 per share, and tranche 2 comprises US$20 million which may be converted into Ironbark shares at the election of Glencore at A$0.50 per share.
Ironbark and Glencore will also enter into an offtake agreement for 35% of the production of concentrates from Ironbark’s Citronen Project in Greenland. If any amount is drawn down pursuant to the facility then the offtake agreement will increase to 55%.
The deal will also allow Ironbark to further strengthen its board, with Glencore having the right to request the addition of three of its representatives to the board if any convertible notes are issued.
Hartleys is Ironbark’s corporate advisor for the facility.