Greenland Minerals and Energy (ASX: GGG) can now move to acquire the remaining 39% of the exploration licence that comprises the Kvanefjeld, Sørensen and Zone 3 deposits in Greenland with the finalisation of an agreement with Westrip Holdings and Rimbal.
Under new equity-based terms, the company will now pay A$5 million to Westrip and Rimbal, as well as issue 67 million shares at $0.45 per share.
The agreement has been amended from the original terms which required Greenland Minerals and Energy to pay $39 million in cash, and issue 7.8 million shares and 5 million options exercisable at $1.50.
The move to full ownership of the Kvanefjeld multi-element project now positions Greenland Minerals and Energy to begin investigating potential strategic partners to participate in the development of the project.
On completion of the deal, the acquisition will represent 15.4% of the company's issued capital, not including the $5 million cash payment.
Greenland Minerals and Energy believes the new terms represent a highly favourable outcome, and one that offers the least-dilutive path to finalising the acquisition of the outstanding 39% of the Kvanefjeld project.
The company is looking to make a decision on the preferred funding option to meet cash requirements in the coming weeks, and is well advanced in pursuing a number of options.
Importantly, the reduction in the cash component of the acquisition from $39 million to $5 million places Greenland Minerals and Energy in a considerably stronger financial position.
Product development from Kvanefjeld demonstrated in PFS
A recent Pre-Feasibility Study identified the clear potential for Kvanefjeld to be developed as a long-life, cost effective producer of heavy, light and mixed rare earth concentrates, uranium oxide and zinc.
Further, the production profile is of global significance in terms of output capacity, and low production costs.
Kvanefjeld will be able to generate four main products including a high grade zinc sulfide concentrate.
The development scenario from an annual 7.2 million tonne throughput would provide 2.6 million pounds of uranium oxide, 4,200 tonnes of heavy rare earth hydroxide, 10,400 tonnes of mixed rare earth carbonate and 26,200 tonnes of light rare earth carbonate.
The defining factor though for the development of Kvanefjeld is the low production costs, with unit costs under US$31 per pound of uranium and less than US$8 per kilogram of total rare earth oxides (TREO), as contained in the three combined rare earth products.
Putting these costs into perspective, Kvanefjeld will be in the bottom half of the cost curve for uranium producers, while also being one of the lowest cost rare earth elements producers worldwide.
The economics of the project are also robust - with a forecast pre-tax, ungeared internal rate of return of 32%, and a cash payback period of less than four years, based on long term prices of US$70 per pound of uranium and US$41.60 per kilogram of TREO. The pre-tax net present value is US$4,631 million.
Capital costs of an open cut mine, a mineral concentrator and a refining plant, capable of treating 7.2 million tonnes per annum, is estimated to cost US$1.53 billion, which includes a contingency of US$247 million.
This deal should increase the potential strategic partners available to Greenland Minerals as moving to 100% of Greenland assets provides greater certainty to financing partners.
Greenland Minerals is looking to make a decision on the preferred funding option to meet cash requirements in the coming weeks. We expect this to pay significant "dividends" to the company earlier rather than later and the company is known to be well-advanced in pursuing a number of options.
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