REG - ECR Minerals PLC - Heads of Terms for Proposed Disposal of MGA

ECR MineralsAnnouncement

23/12/2024 07:00

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RNS Number : 0896R  ECR Minerals PLC  23 December 2024

This announcement contains inside information for the purposes of Regulation
11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310.

 

ECR MINERALS PLC

 

("ECR Minerals", "ECR" or the "Company")

 

Heads of Terms for Proposed Disposal of MGA

 

ECR Minerals plc (LON: ECR), the exploration and development company focused
on gold in Australia, is pleased to announce that, further to previous
announcements, it has entered into a non-binding heads of terms (the "Heads of
Terms") with Octo Holdings Pty Ltd ("Octo") regarding the proposed sale (the
"Proposed Disposal") of the entire issued share capital of ECR's wholly-owned
subsidiary, Mercator Gold Australia Pty Ltd ("MGA"). MGA holds certain of the
Company's exploration assets in Victoria, Australia but will be restructured
prior to the Proposed Disposal as described below.

 

Highlights of the Proposed Disposal pursuant to the non-binding Heads of
Terms:

 

·    Total cash consideration to be payable of A$4.5 million

·    Payable in two equal cash tranches: the first tranche on completion
of the Proposed Disposal and the second tranche on or before 31 March 2025

·    MGA is to be restructured such that the Creswick and Tambo projects
will be transferred to another of the Company's subsidiaries, so that these
projects are excluded from the Proposed Disposal

·    The Bailieston gold and antimony exploration project will remain in
MGA and therefore would be included in the Proposed Disposal

·    MGA holds ECR's A$75 million of tax losses which represent the main
asset that is to be disposed

 

Overview of the Proposed Disposal

 

Pursuant to the Heads of Terms, Octo has agreed to acquire MGA on a cash-free
and debt-free basis.  It is proposed that, on or before completion of the
Proposed Disposal, ECR will effect a reorganisation of MGA such that the only
exploration assets remaining within MGA will be the four exploration tenements
collectively known as the Bailieston project (EL5433, EL006911,
EL006912, and EL007296), which targets gold and antimony mineralisation over
142 km(2) of exploration ground within the Melbourne zone. Although
potentially encouraging antimony results have been reported from the
Bailieston project  (as announced on 3 July 2024), the Bailieston project is
considered by the Board to be a non-core asset given ECR's key focus on gold
exploration.

 

It is proposed that the tenements comprising ECR's core Creswick and Tambo
gold exploration projects, along with the lease of ECR's premises near
Bendigo, Victoria, will be transferred to another of the Company's wholly
owned subsidiaries and so would be excluded from the Proposed Disposal.
Furthermore, MGA's contracts with ECR's employees, consultants and other
suppliers will be similarly transferred such that the Proposed Disposal will
have no impact on ECR's ongoing Victoria operations at the Creswick and Tambo
projects. For the avoidance of doubt, ECR's core Lolworth and Blue Mountain
projects and the Kondaparinga project (all of which are based in Queensland)
are held via a different ECR subsidiary and will therefore be unaffected by
the Proposed Disposal.

 

Under the Heads of Terms, the consideration to be payable by Octo is to be
A$4.5 million and is to be settled in two equal tranches in cash, with the
first tranche on completion of the Proposed Disposal and the second tranche on
or before 31 March 2025.

 

The Heads of Terms restate the exclusivity period between ECR and Octo until
31 January 2025 and it is the parties' expectation that the Proposed Disposal
will be concluded before that date.  In the event that further time is
required to finalise the pre-completion steps summarised in this announcement,
then Octo has the right to extend the exclusivity period for a further 28 days
in return for the payment of a commitment fee of A$50,000 (which is refundable
in certain circumstances), which would be deductible from the first tranche of
the consideration.

 

It is noted that the Heads of Terms are not binding in relation to the terms
of the Proposed Disposal, as described above, and that the Proposed Disposal
will be subject, among other things, to due diligence by Octo and the
execution of a legally binding agreement governing the transaction. There can
therefore be no certainty that final binding terms will be agreed, nor as to
the timing or final terms, value or conditions of the Proposed Disposal or the
final position in respect of the proposed pre-completion restructuring of MGA.
 

 

As previously announced, the Proposed Disposal may be considered to be a
fundamental change of business pursuant to Rule 15 of the AIM Rules for
Companies. If applicable, this would require, amongst other items, the
Proposed Disposal to be conditional on the consent of shareholders being given
in a general meeting, the publication of a shareholder circular detailing the
terms of the transaction and certain other disclosures as set out in the AIM
Rules.

 

Proposed use of proceeds

 

Subject to its completion, ECR currently intends to use the net proceeds from
the Proposed Disposal to advance the exploration and development of its
Queensland and Victoria projects, as previously announced.  In particular,
the Board considers that the stronger balance sheet that the Company would
have on completion of the Proposed Disposal will accelerate its ability to
commercialise its core projects.

 

The board will also assess potential additional value-accretive opportunities
for the Company.

 

The Board considers that the combination of the subscription that was
announced in November 2024 and the Proposed Disposal proceeds would ensure
that ECR would be fully funded for all of its currently planned activities for
the medium-term future.

 

Next Steps

 

It is proposed that the parties' legal advisers will now prepare the necessary
definitive and binding agreement to effect the Proposed Disposal and, as
described above, ECR will organise the pre-completion restructuring of MGA.
Octo will conclude any remaining due diligence on MGA and its assets
simultaneously with these workstreams.

 

 

Nick Tulloch, ECR's Chairman, said: " These Heads of Terms represent a
significant milestone in our strategy to unlock value from our Australian
assets. As investors will know, this has been a complex process and it is a
credit to the entire ECR team that we are now at this stage.  Once completed,
the Proposed Disposal will provide significant cash proceeds to strengthen our
balance sheet and the simultaneous restructuring has been designed to preserve
the core value within ECR without interruption to our ongoing key operations
at Creswick and Tambo.  Once the Proposed Disposal has been completed, ECR
will be fully funded for all of its currently planned activities for the
medium-term future."

 

Financial information relating to the Proposed Disposal

 

Set out in the Appendix to this announcement is a summary of the audited
Statement of the Financial Position and the Statement of Profit or Loss and
Other Comprehensive Income for MGA for the year ended 30 September 2023, being
the date to which ECR's last audit was prepared.

 

It is noted that this historic financial information does not reflect the
proposed pre-completion restructuring of MGA described above.  In particular,
shareholders should note the following key adjustments to MGA which are
anticipated to occur in relation to its proposed pre-completion restructuring:

 

·    All cash balances within MGA at the point immediately prior to
completion will be retained by ECR (MGA's cash balances as at 20 December 2024
are approximately A$10,000)

·    MGA's assets, and particularly the fixed assets and Capitalised
Development Expenditure, will be apportioned between the Bailieston, Creswick
and Tambo projects, with the Creswick and Tambo projects (comprising the
majority of MGA's assets) being retained by ECR

·    Investments by MGA in ECR's other subsidiaries, Mercator Gold Holding
and Lux Exploration, will be written off

·    The inter-group loan from ECR to MGA of A$99 million will similarly
be written off

·    All other liabilities of MGA, save for those in respect of the
remaining Bailieston project tenements, will be settled in full

·    The majority of the expenses in the Statement of Profit or Loss and
Other Comprehensive Income relate to the Creswick and Tambo projects, as well
as the ongoing running of ECR's administrative functions in Australia and so
will continue to be borne by ECR following completion of the Proposed Disposal

 

Appendix - extracted audited historic financial information on MGA

 

Mercator Gold Australia Pty Ltd

Statement of Financial Position

For the Year ended 30 September 2023

 

                                      30 September 2023
                                      A$

 Current Assets
 Cash and cash equivalents            132,874
 Other receivables                    18,903
 Inventory                            -
 Total Current Assets                 151,777

 Fixed Assets
 Fixed Assets                         753,585
 Accumulated depreciation             (215,609)
 Total Fixed Assets                   537,976

 Other Non-Current Assets
 Acquisition of Mining Properties     50,000
 Capitalised Development Expenditure  7,319,104
 Investment in Mercator Gold Holding  849,800
 Investment in Lux Exploration        636,200
                                      8,855,104

 Total Assets                         9,544,857

 Current Liabilities
 Trade and other payables             61,368
 Loan from ECR Minerals Plc           99,036,939
 Total current liabilities            99,098,307

 Non-current Liabilities
 Trade and other payables             2,434,859
                                      2,434,859

 Total Liabilities                    101,533,166

 Net Liabilities                      (91,988,309)

 Equity
 Issued capital                       391
 Accumulated losses                   (91,988,700)
 Total Equity                         (91,988,309)

 

Mercator Gold Australia Pty Ltd

Statement of Profit or Loss and Other Comprehensive Income

For the Year ended 30 September 2023

 

                                         30 September 2023
                                         A$

 Revenue                                 -
                                         -
 Income
 Interest Income                         3,591
 Other income                            4,818

 Gross profit                            8,408

 Expenses
 Accounting and audit fees               790
 Consultants                             99,916
 Bank charges                            913
 Depreciation expense                    225,817
 Insurance                               13,716
 Legal fees                              7,652
 Development expenses                    1,121,517
 Director's fee                          20,000
 General expenses                        24,623
 Office expenses                         6,174
 Management Fees                         270,620
 Rent                                    42,317
 Travel                                  17,240
 Employment expenses                     37,153
 Loss on investment                      -
 Loss on disposal of asset               81,734

 Total Expenses                          1,970,182

 Less: Development expenses Capitalised  (1,121,517)

 Profit/(Loss) before income tax         (840,256)

 Income tax expense                      -

 Profit/(Loss) for the year              (840,256)

 

 

FOR FURTHER INFORMATION, PLEASE CONTACT:

 

 ECR Minerals Plc                                                                                                                                                                                                                                                     Tel: +44 (0) 1738 317 693
 Nick Tulloch, Chairman

 Andrew Scott, Director

 Email:

 info@ecrminerals.com
 Website: www.ecrminerals.com
 (http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.ecrminerals.com%2F&esheet=51817334&newsitemid=20180605005810&lan=en-US&anchor=www.ecrminerals.com&index=1&md5=820ad49dc1fc2c84a0538453c017bc1b)

 Allenby Capital Limited                                                                                                                                                                                                                                              Tel: +44 (0) 3328 5656
 Nominated Adviser                                                                                                                                                                                                                                                    info@allenbycapital.com (mailto:info@allenbycapital.com)

 Nick Naylor / Alex Brearley / Vivek Bhardwaj

 Axis Capital Markets Limited                                                                                                                                                                                                                                         Tel: +44 (0) 203 026 0320
 Broker
 Ben Tadd / Lewis Jones

 SI Capital Ltd                                                                                                                                                                                                                                                       Tel: +44 (0) 1483 413500
 Broker
 Nick Emerson

 Brand Communications                                                                                                                                                                                                                                  Tel: +44 (0) 7976 431608
 Public & Investor Relations
 Alan Green

 

ABOUT ECR MINERALS PLC

 

ECR Minerals is a mineral exploration and development company. ECR's wholly
owned Australian subsidiary Mercator Gold Australia Pty Ltd ("MGA") has 100%
ownership of the Bailieston and Creswick gold projects in central Victoria,
Australia, has six licence applications outstanding which includes one licence
application lodged in eastern Victoria (Tambo gold project).

 

ECR also owns 100% of an Australian subsidiary LUX Exploration Pty Ltd ("LUX")
which has three approved exploration permits covering 946 km(2) over a
relatively unexplored area in Lolworth Range, Queensland, Australia. The
Company has also submitted a license application at Kondaparinga which is
approximately 120km(2) in area and located within the Hodgkinson Gold
Province, 80km NW of Mareeba, North Queensland.

 

Following the sale of the Avoca, Moormbool and Timor gold projects in
Victoria, Australia to Fosterville South Exploration Ltd (TSX-V: FSX) and the
subsequent spin-out of the Avoca and Timor projects to Leviathan Gold Ltd
(TSX-V: LVX), MGA has the right to receive up to A$2 million in payments
subject to future resource estimation or production from projects sold to
Fosterville South Exploration Limited.

 

MGA also has approximately A$75 million of unutilised tax losses incurred
during previous operations.

 

Bailieston Project - Background

 

The Bailieston project targets epizonal gold and antimony mineralisation and
lies within the Melbourne zone, located approximately 150km north of the
Victorian state capital, Melbourne. The project is located geologically within
the orogenic Lachlan Fold Belt (LFB), and is subdivided into geological zones
based on distinct geological and metallurgical characteristics.

 

The project is characterised by gold and antimony mineralisation, and across
the zone ECR Minerals holds a total of 142 km(2) of exploration ground across
four tenements (EL5433, EL006911, EL006912 and EL007296). These tenements
enjoy good road access, and contain the historical prospects known as HR3
(Byron-Maori), HR4 (Cherry Tree), Blue Moon, Black Cat and Pontings, all of
which have a history of exploration and some modest production. Updates
relating to the Bailieston project were recently announced on 10 September
2024 and 3 July 2024 and further information on the Bailieston project can be
found on the Company's website: https://ecrminerals.com/
(https://eur03.safelinks.protection.outlook.com/?url=https%3A%2F%2Flinks.uk.defend.egress.com%2FWarning%3FcrId%3D67687dfbb32cdcd1501bb10d%26Domain%3Dallenbycapital.com%26Lang%3Den%26Base64Url%3DeNrLKCkpKLbS109NLsrNzEstSswp1kvOz9UHAHIVCP0%253D%26%40OriginalLink%3Decrminerals.com&data=05%7C02%7C%7Cb8b7d77e858e4daf03f208dd22cbb36c%7Cfc69750aedcc43bebd5b2cbe6f8d8c37%7C0%7C0%7C638704980511653205%7CUnknown%7CTWFpbGZsb3d8eyJFbXB0eU1hcGkiOnRydWUsIlYiOiIwLjAuMDAwMCIsIlAiOiJXaW4zMiIsIkFOIjoiTWFpbCIsIldUIjoyfQ%3D%3D%7C0%7C%7C%7C&sdata=F06r%2FrtzlkLq85tkJsefo50zK1XmowHTUgmYuNHisJo%3D&reserved=0)
 

 

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