NQ Minerals to acquire Hellyer Gold Mine, Tasmania

NQ Minerals PLC
(the “Company” or “NQ Minerals”; NEX:NQMI)”)
NQ Minerals to acquire Hellyer Gold Mine, Tasmania

21 April 2017

NQ Minerals Plc (“NQ Minerals” or “the Company”) (NEX: NQMI) (OTCQB: NQMLF) has entered into an agreement to acquire all of the issued and outstanding shares of Keen Pacific Limited (“Keen”), along with its wholly-owned subsidiaries Ivy Resources Pty Ltd and Hellyer Gold Mines Pty Ltd (the “Contract”). The acquisition would see NQ Minerals wholly own the prospective Hellyer Gold Mine in Tasmania, Australia and is in line with the Company’s strategy of becoming a near-term revenue generating gold and base metal production company.

Highlights:

  • Permitted project with life of mine revenues exceeding AU$1.3 bn (US$1.033bn)
  • Post Tax IRR 130%
  • Post Tax NPV AU$276 m (US$210m)
  • 56% gross margin
  • Low start-up capex requirement – AU$20 m
  • 10-year mine life
  • Existing fully covered, fully operable 1.6mtpa fully automated flotation plant
  • Undercover concentrate loading station
  • Existing railway from plant to port
  • Existing port concentrate housing, handling and loading facilities
  • Existing tailings dredge
  • Skilled available workforce
  • Short start up time period

* Note: Highlights are based on most recent management evaluation of the project’s potential.

Benefits of the Transaction for NQ Minerals Shareholders:

  • Adds a JORC compliant resource to NQ Minerals’ portfolio of assets in a premier geopolitically stable mining jurisdiction;
  • Enhances NQ Minerals’ development and production pipeline with the potential to commence production at the Hellyer property within 12 months;
  • Provides near term cash flow; and
  • Aligns well with the experienced and disciplined management team that has been formed to optimise the project outcomes.

NQ Minerals’ acquisition of the Hellyer Gold Mine allows the opportunity to fully process and bring the tailings to account. Held within four separate areas, the tailings total 11.24 mt, and comprise a JORC compliant resource estimated at 9.5 mt which is host to Gold at 2.61 g/t Au for 796,000 oz Au, Silver at 104 g/t Ag for 32 m oz Ag, Lead at 3.03% Pb for 287,800 tonnes and Zinc at 2.5% Zn for 237,900 tonnes.  In addition to these tailings, the Hellyer Gold Mine assets include a large pre-existing mill facility and full supporting infrastructure, including a direct rail line to port. It also includes a fully permitted Consolidated Mining Lease CML 103M – 1987.

NQ Minerals Chairman Brian Stockbridge said, “The Hellyer Gold Mine will be a flagship project for NQ Minerals and is expected to see us transform into a near-term producer within a 12 month time-frame. First work will involve the refurbishment of the existing operating facilities in order to extract and treat the large high-grade tailings deposit on site and produce three marketable concentrates (lead, zinc, gold/silver/pyrite). The project is expected to be producing within a short time period and offers the potential for attractive returns with a quick payback of capital. The Board believes Hellyer is a world-class, company-maker project that blends well with our North Queensland assets and our long term goal to become a significant gold and base metal producer in Australia.”

Acquisition – Contract Terms

The purchase price for Keen under the Contract is AU$20 million in cash plus such number of ordinary shares in NQ Minerals as will give the vendors of Keen 29.9% of the share capital of NQ Minerals as enlarged by (i) the shares issued to the vendors of Keen, (ii) existing warrants and other subscription rights, and (iii) shares (on a fully diluted basis, if in the form of warrants or other subscription rights) issued to providers of finance to fund the cash consideration. The consideration shares are intended to be issued over time, as increases in NQ Minerals’ share capital allow without triggering a mandatory offer obligation on the part of the vendors of Keen under the UK City Code on Takeovers and Mergers. The vendors will, at Completion, enter into an orderly market arrangement in respect of their consideration shares for a period of twelve months following Completion, subject to certain customary exceptions.

The acquisition incorporates vendor finance with a repayment timeline for the cash/loan component including an aggregate of:

  • AU$400,000 in deposits, (which has already been paid);
  • AU$6,600,000 in cash payable on completion of the acquisition (“Completion”);
  • AU$7,000,000 6% fixed rate loan note issued by NQ Minerals PLC repayable one month after Completion; and
  • AU$6,000,000 6% fixed rate loan note issued by NQ Minerals PLC repayable two months after Completion.

NQ Minerals has agreed to grant security to the vendors including over a portion of the issued shares in Keen and its wholly-owned subsidiaries at Completion to secure its obligations under such loan notes.

Completion is conditional on the passing of certain resolutions by NQ Minerals’ shareholders. The Contract contains warranties and indemnities in a customary form for a transaction of this nature as well as rights to terminate the agreement in certain circumstances prior to Completion, including for a breach of material obligations which is not remedied within seven days of demand.

Financing the Acquisition

NQ Minerals has entered into an AU$8,500,000 loan facility (“Facility”) from a New Zealand family office to finance Completion. The Facility attracts an annual interest rate of 12% and is repayable within three years. The Facility is secured on the assets of the Company and its subsidiaries (including Keen and its subsidiaries once acquired), but allows the Company to grant security to other financing parties to raise a further AU$27,500,000. The Facility is conditional, inter alia on the approval of NQ Minerals shareholders and the satisfaction of other customary conditions precedent. The Facility also carries options over 64,300,000 shares in the Company at an exercise price of 8p per share, exercisable for five years. In addition, the lender has the right to appoint a director to the board of the Company and its subsidiaries.

The Company intends to conclude the financing to redeem the AU$13,000,000 fixed rate vendor loan notes, as described above, prior to the shareholder meeting and the circular to shareholders will contain further details.

Related Party Transaction

Roger Jackson, a director of NQ Minerals, is also a shareholder of Keen.  As a result, the proposed acquisition is a related party transaction under the NEX Exchange Growth Market – Rules for Issuers and is conditional on shareholder approval under Section 190 of the Companies Act 2006. Mr Jackson has entered into a commission arrangement with the vendors of Keen in relation to the financing of the Hellyer project.

The Directors consider, having consulted with Daniel Stewart, the Company’s corporate adviser, that the terms of the related party transaction are fair and reasonable insofar as shareholders are concerned.

Shareholder Approval

NQ Minerals looks forward to presenting details of the acquisition and the project to shareholders for their approval at a meeting to be held on 15 May, 2017. Notification and details will be provided to shareholders in a circular to be dispatched by 28 April 2017, including information on proxy votes for those who may not be able to attend the meeting.

About NQ Minerals

NQ Minerals is an Australia-based exploration and mining company, focusing on projects where past exploration work has established the presence of mineral occurrences. The Company’s management team has decades of experience in the exploration and production of gold, silver and a variety of base metals. Please visit our website at www.nqminerals.com

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For further investor information, please contact:

NQ Minerals Plc    
Brian Stockbridge, Non – Executive Chairman
+ 44 (0) 7876 888011

Kris Kottmeier, VP Corporate Development
+ 44 (0) 20 3637 6522 (UK)
+ 1 (604) 506 6502 (North America)

Daniel Stewart & Company Plc    
Richard Potts
+ 44 (0) 20 7776 6596
Daphne Zhang
+ 44 (0) 20 7776 6550

Yellow Jersey PR    
Felicity Winkles
+ 44 (0) 776 932 5254
Joe Burgess
+ 44 (0) 776 932 5254