Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Fox Resources Secures $3.8M Funding Facility From The Lind Partners

Fox Resources (ASX: FXR) has secured up to $3.8 million in funding to progress its planned Queensland coal exploration program from The Lind Partners' Australian Special Opportunity Fund.

Exploration will focus on the Bundaberg project that is located next to a discovery made by International Coal (ASX: ICX) and a subsidiary of Gina Rinehart's Hancock Prospecting.

Under the Share Purchase and Convertible Security Agreement, the company will receive $350,000 on execution in the form of a $300,000 convertible security and $50,000 as a prepayment for fully paid ordinary shares in FXR.

Lind will further invest from $50,000 to $150,000, in monthly share subscriptions, over the next two years.

"The Agreement with Lind will allow FXR to advance its exploration program with the hopes of unlocking significant value at its Bundaberg Coking Coal Project," managing director Paul Dunbar said.

"The Agreement ensures that the company's ongoing efforts are fully funded as we advance our Queensland coal project over the coming months."

Separately, non-executive director Rod White has announced his retirement from the board.

Bundaberg and Queensland Coal

The company had recently completed the transfer of 16 coal tenements - including Bundaberg, Styx, Emerald, Springsure, Alpha and Eromanga - from vendor XLX Exploration.

Fox plans to drill seven holes at Bundaberg (EPC 1523) to varying depths along five nominal west-to-east lines to determine if the seams intersected by ICX at EPC 2196 to the northeast are continuous with and correlate to those intersected in historical 1970's - 1980's drilling, which are located at shallow depths of <150 metres.

These holes will be geophysically logged and are expected to enable the company to generate a structural model that will allow Resource calculation.

Notably, ICX and Hancock have delivered an Inferred JORC Resource of 28.5 million tonnes for their project, and a further down-dip exploration target of 20 to 40 million tonnes within the neighbouring EPC 2196 tenement. The hard coking coal characteristics compare favourably to those found in the Bowen Basin.

The tenements, which cover 10,358 square kilometres, have good access to infrastructure necessary for commercial development.

Lind Funding Agreement

The Agreement provides FXR with certainly of a base level of funding over the next 24 months. The amount of up to $3,800,000 is to be made available to FXR as follows:

- FXR has issued an unsecured convertible security with a face value of $300,000 and a term of 24 months at a zero% interest rate. Lind is restricted from converting the note into shares in the first 90 days post-execution of the Agreement; and
- Over 24 months, a minimum of $50,000 of shares will be purchased by Lind from FXR, approximately monthly, which may be increased to $150,000 by mutual consent, subject to compliance with the terms of the Agreement. FXR has the right to pause the monthly tranche issues.

As part of the Agreement, Lind has been granted 4,000,000 options (each exercisable at $0.0261 and expiring 2 October 2015). FXR has also paid Lind a commencement fee of $125,000, satisfied through the issue of 5,738,731 shares.

The structure of the investments allows FXR to issue shares at prices that are linked to prices prevailing at the time, potentially at premiums to the current share price, minimising dilution for existing shareholders.

The price at which shares will be issued under the share purchase facility is 90% of the average of the 3 daily VWAPs during a specified period prior to the issuance of shares.

It also preserves the company's financial flexibility, as it expressly allows it to carry out additional private placements nor place any restrictions on its entering into strategic industry partnerships.

Analysis

The funding arrangement with The Lind Partners highlights the potential attributed to Fox Resources' Bundaberg project, given its proximity to International Coal's coking coal project and infrastructure.

It provides a base level of funding that will allow Fox to carry out the exploration work needed to unlock its value.

Success at the Bundaberg project will undoubtedly be value-accretive for Fox.

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.