The combined company assets Melior Resources Inc. (TSXV: "MLR") ("Melior" or the "Company") is pleased to announce that it entered into a binding arrangement agreement (the "Arrangement Agreement") with Australian Stock Exchange ("ASX") listed Metallica Minerals Limited (ASX:"MLM") ("Metallica") on September 12, 2018 which sets out the terms and conditions of a merger (the "Merger") of the two companies.
The Merger will be by way of a court approved plan of arrangement (the "Arrangement") in which Metallica will acquire all of the issued and outstanding common shares of Melior in exchange for Metallica ordinary shares at an agreed exchange ratio of twenty (20) Metallica shares for every one (1) Melior share (the "Exchange Ratio"). On completion of the Merger, Melior shareholders will hold 64% of Metallica's issued capital and Melior will become a wholly owned subsidiary of Metallica. Metallica will remain listed on the ASX and Melior will be de-listed from the TSX Venture Exchange ("TSXV") and cease to be a reporting issuer in Canada.
Based on Melior's closing share price on September 11, 2018, the Exchange Ratio represents consideration of A$0.0449 per Metallica share which is a premium of 45% to Metallica's closing price on September 11, 2018. Based on the respective 3 month volume weighted average prices of Metallica and Melior, as at September 11, 2018, the consideration represents a premium of 23%.
Upon completion of the Arrangement, all outstanding Melior options and warrants will be exchanged for an equivalent number of Metallica replacement options and warrants exercisable for Metallica shares.
Mark McCauley, Melior's Chief Executive Officer, stated: "This is a great opportunity for Melior to keep moving forward and positioning itself for genuine shareholder wealth creation. The merger with Metallica is an attractive and low risk proposition providing a stronger platform for growth via an enhanced pipeline of development assets, a strengthened balance sheet and an ASX listing. Goondicum is on schedule to commence production in November and start generating cash by Q2 2019 and there are good prospects for realizing value shortly thereafter from the Metallica asset portfolio. The value-focused culture and combined technical and commercial skills of the two companies will also greatly enhance the merged group's capabilities."
Metallica's Chairman, Mr. Peter Turnbull said: "This is a transformational deal for both companies. Melior's Goondicum Ilmenite project shares similar attributes to Urquhart Bauxite in that it is fully funded and will be brought into production relatively quickly for a modest capital outlay and will provide a valuable source of near-term cash flow. We look forward to combining the respective skills of the two companies to successfully develop those projects and pursue further growth opportunities to build a significant, profitable, mining house generating excellent returns for shareholders."
Post-Merger, the Metallica board of directors will consist of three directors from Metallica (Simon Slesarewich, Peter Turnbull and Ian Jacobson) and three directors from Melior (Mark McCauley, Martyn Buttenshaw and George Lloyd). George Lloyd will assume the independent, non-executive Chairman's role. Simon Slesarewich will retain the Managing Director's role and Mark McCauley (current Melior Chief Executive Officer) will assume an executive director role.
On completion of the Merger, the merged entities will have approximately $6.6 million of cash and liquid securities, a project coming into production with near term cashflow and a pipeline of longer term development and exploration assets, all located in Queensland, Australia. These assets are briefly described below:
-- Goondicum Ilmenite & Phosphate rock mine (100%): Goondicum is fully funded and is scheduled to restart production in November 2018. Goondicum currently has a scheduled nine year mine life producing an average of 160ktpa of ilmenite and 38ktpa of apatite. The recently completed preliminary economic assessment ("PEA") shows a before tax project NPV8 of US$56 million. Goondicum has previously had over $120 million of capital spent on it and is expected to produce above benchmark quality ilmenite and apatite products.
-- Cape York Heavy Mineral Sands & Bauxite Project JV (50%): This asset consists of the Urquhart Point heavy mineral sands (HMS) project and the adjacent Urquhart Point Bauxite (UPBx) project. Both projects are located just south of Weipa on the western side of Cape York Peninsular in North Queensland. The HMS project is small scale; however, it has a granted mining license and an unused 120 tph mobile HMS processing plant, with replacement value of $4 million, associated with it. UPBx also has a granted mining license and all environmental approvals in place necessary to commence mining; however, work is continuing on the most efficient means of shiploading. Additional work will be undertaken in the short term to assess the optimal means of creating value from this project and take advantage of the growing Chinese demand for Australian bauxite.
-- Cape Flattery Silica Sands Project (100%): This project consists of an exploration permit and is adjacent to Mitsubishi's Cape Flattery Mine, the world's largest source of high purity silica sand. A maiden sampling program which was completed by Metallica in April 2018 confirmed the presence of high purity silica sand. This is an early stage exploration project and further work is required to present a JORC resource and assess its economic merits.
-- Esmeralda Graphite Project (100%): This project is located in North Queensland and is an igneous or hydrothermal style graphite deposit with two drill holes intersecting broad graphite mineralization up to 95m thick at a depth of just over 70m. This is an early stage exploration project and further work is required to present a JORC resource and assess its economic merits.
Metallica also has a A$5 million receivable as part of the recent sale of Metallica's Sconi Co-Ni project to Australian Mines Limited, to be paid on commencement of production at that project, as well as significant tax losses.