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Ascot Resources Attracts New Funds From Resource Capital Fund V

Ascot Resources (ASX: AZQ) is raising $400,000 through a term sheet with existing cornerstone investor, Resource Capital Fund V and is expanding the footprint of its Titiribi Coal Project in Colombia.

It has also successfully renegotiated key terms of the Titiribi Joint Venture Agreement, making it materially more favourable.

The company is acquiring three additional concessions north and south of the Titiribi Coal Project in Colombia that could increase coal resources.

The new concessions cover 503 hectares, representing a 250% increase in Ascot's current land holding.

Total consideration of the acquisition is US$50,000, payment of which will be made over the coming week.

"The acquisition of the additional concessions located along strike represents a critical milestone in the company's plans for the Titiribi Project," executive chairman Andrew Caruso said.

"The potential for a significant and material uplift in overall mineralisation will lift both the profile and underlying value of the Project, translating into increased shareholder value."

He added the revised joint venture terms will support the and its Carbones de Titiribi Joint Venture's (CdTJV) ability to achieve a higher value, near-term production solution for the Titiribi Project.

"These achievements are a reflection of Ascot's commitment to the Titiribi Project, and provide affirmation of the Company's vision to grow its Colombian coal business."

Ascot continues to progress negotiations with parties interested in funding and developing the Project, the finalisation of which remains a key priority.

Term Sheet

The company has entered into a term sheet with existing cornerstone investor, Resource Capital Fund V L.P. (RCF V), for the issue of a 17-month unsecured loan note raising $400,000.

Funds raised under the Note will be directed towards funding the Company's 2014 operations and for general corporate and working capital purposes.

The Note is to be convertible at RCF V's election into fully paid ordinary shares in the company at a conversion price of $0.06 per share, which represents a 9.5% premium to the 10 day volume weighted average price of Ascot shares prior to 13 December 2013.

Ascot has undertaken to obtain requisite shareholder approvals to enable conversion within 3 months of the issue of the Note, otherwise the Note becomes immediately repayable.

The Company has the ability to redeem the Note on or after 9 May 2014 by giving the requisite notice to RCF V.

The Note carries a coupon rate of 14% per annum, payable quarterly in arrears. At the Company's election, interest 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.

New Concessions

The Arrayanal, Floresta, Arbolitos and Rio Amaga concessions previously formed part of two larger concession applications and, following recent conversion to title, are in the process of being transferred into the CdTJV.

The concessions are known to contain the Amaga coal formation, which is expected to be host to all the economic coal.

Effective transfer is expected to occur during the second quarter of 2014.

Analysis of geological mapping and non-invasive geophysical exploration work reflects potential for sizeable mineralisation in the Arrayanal concession alone, suggesting the new areas collectively present a significant opportunity to increase the resource estimate as well as underlying value and investment return for the Project.

Ascot's current base case modelling does not take into consideration any of this upside.

Following effective transfer of the concessions, the CdTJV will seek to expedite exploration work within Arrayanal with the goal of increasing the existing project resource estimate and update the Pre-Feasibility Study by the first half of 2014.

In parallel with the exploration work, the CdTJV plans to finalise submissions necessary for mining and environmental approvals, both of which are currently being planned and drafted by Ascot's team in Colombia.

Joint Venture Changes

Ascot has successfully renegotiated key terms of the Titiribi Joint Venture Agreement, making it materially more favourable and reflecting its intentions to ensure it is conducive to its achieving production objectives once final studies are completed and approvals and funding are in place.

Major changes include:

- A US$700,000 reduction in payments due at initial commercial exploitation to US$300,000;
- Simplified JORC-linked Resource production royalty of US$0.90 per tonne;
- Removal of the JORC Reserve linked payment structure; and
- Removal of the dilution clause which provided for the possible increase in the JV partner's interest, ensuring Ascot's share of the Joint Venture will remain at 90%.

Titiribi Coal Project

The Titiribi coal project in Colombi is located close to existing infrastructure, being just 2 kilometres to major highways which provides a means to export product from Turbo or Port Buenaventura (350km and 450km from the project respectively).

It has a total Measured, Indicated and Inferred Resource of 8.1 million tonnes.

Based on the Measured and Indicated components, the Pre-Feasibility Study highlights the potential for a starter mine with minimum 5 year Life-of-Mine (LOM) based on production rate of up to 400,000tpa.

This outlined some impressive metrics including an initial start-up capital of just US$7.8 million, with a low average cash operating cost of US$44/t at mine gate (US$84/t FOB port).

The outcomes were based on a blended metallurgical coking coal product with low ash, ultra-low phosphorus, medium volatiles and Free Swell Indexes (FSIs) averaging 6.7.

Analysis

Securing the additional concessions has the potential to add to resources at Ascot Resource's Titiribi Coal Project.

Proving this will be immediately value accretive for the company, adding as it does to underlying value of the project.

This is reinforced by the more attractive joint venture terms that not only makes the agreement materially more favourable - given the lower payments, but also streamlines it with the simplified JORC-linked Resource production royalty and removal of the dilution clause.

To top it off, existing cornerstone investor Resource Capital Fund V, will be providing $400,000 in funding to progress the company's operations and for working capital.

This highlights the attractiveness of the Titiribi Coal Project.

Share price catalysts ahead include:

- Results from planned exploration at the new Arrayanal concession;
- Updated project Resource estimate;
- Updated Pre-Feasibility Study conclusions by the first half of 2014.

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