Greenland Minerals and Energy (ASX:GGG) will gain $8.87 million in funding through a rights issue to finalise a mining licence application for the massive Kvanefjeld rare earth-uranium project in southern Greenland.
The fully underwritten issue has received strong support from institutional and sophisticated investors in Australia and Europe.
Danish pension funds were also known to have participated providing a strong endorsement of Kvanefjeld.
GGG is offering shareholders a total of 88,685,050 new shares through the offer of 2 shares priced at $0.10 each for every 13 shares held.
The new offer is pitched at a 30% discount to 1 month VWAP of $0.143 and a 42% discount to 3 months VWAP of $0.171.
There is also a free attaching option exercisable at $0.20 with a term of 2 years for every share subscribed (exercise price $0.20 / 30 June 2016) to be listed.
Shareholders can also apply for "overs" - additional shares above entitlements, guaranteed via the purchase of additional rights.
Kvanefjeld is underpinned by one of the world's largest resources of both rare earth elements and uranium with an overall resource inventory of 956 million tonnes containing 575 million pounds of U3O8, 10.33 million tonnes of total rare earth oxides and 2.25 million tonnes of zinc
Use of Funds
Net proceeds from the fully underwritten renounceable rights issue will be combined with existing cash reserves - $5.1 million as of 31 March 2014 - to complete key components of a mining license application for its Kvanefjeld Project.
This includes Environmental and Social Impact Assessments, improving the quality of mineral resources and to seek the establishment of Measured resources, engineering design work and updated cost estimates.
GGG will also continue to progress discussions with key development partners, including tier‐one rare earth industry participant China Non‐Ferrous Metal Co (NYSEMKT:NFC), with which it has already signed a Memorandum of Understanding.
Patersons Securities Limited acts as Lead Manager and the Underwriter. Wimmer Financial LLP and CPS Capital Group Pty Ltd act as co‐managers.
The offer has already received strong demand from Australian and European institutional and sophisticated investors, including Danish pension funds.
This had led the bookbuild to close significantly oversubscribed.
Kvanefjeld Multi-Element Project
The Kvanefjeld Project in southern Greenland has large resources of 575 million pounds of U3O8, 10.33 million tonnes of total rare earth oxides and 2.25 million tonnes of zinc with direct shipping access to markets in North America and Europe.
This has the potential to rival BHP Billiton's Olympic Dam project in South Australia, with sufficient Resources to sustain a mine life of more than 50 years.
Notably, the unique non-refractory ore allows for the use of simple, atmospheric acid leach circuits for processing that is readily scalable with low‐technical risk.
GGG had late last year completed the key process engineering design while a Mine and Concentrator Study released in March 2013 indicated that the initial 3 million tonne per annum project will generate a pre‐tax, ungeared internal rate of return of 32% and a cash payback period of three years, based on long term prices of US$70 per pound U3O8 and US$23 per kilogram total rare earth oxides (TREO).
Kvanefjeld also benefits from the Greenland Government's decision last year to repeal its zero-tolerance uranium policy.
To top it off, GGG has reached a Memorandum of Understanding with China Non‐Ferrous Metal Industry to progress the rare earth potential of the Kvanefjeld Project in Greenland.
Under the terms set out in the MoU, both parties intend to increase the technical cooperation to assist in the completion of feasibility studies on Kvanefjeld, and finalise a mining license application.
That Greenland Minerals and Energy has received strong demand from institutional and sophisticated investors including Danish pension funds for its rights issue reflects the Kvanefjeld multi-element project's standing as a world‐class specialty metals project.
The support from Danish institutional fund managers is a ringing endorsement of the investment upside seen in the share price.
Notably, the bookbuild closed significantly oversubscribed.
The raising will allow the company to progress the all important mining licence application for the project, which is underpinned by an overall Resource of 10.33 million tonnes of total rare earth oxides and 575 million pounds of U3O8.
GGG is also progressing the Definitive Feasibility Study for the project, which will be a key share price catalyst on completion.
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