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Lynas Corporation agrees to sale, potential development of Mount Weld rare earth deposits

Lynas Corporation agrees to sale, potential development of Mount Weld rare earth deposits

Lynas Corporation (ASX: LYC, OTC: LYSDY) has signed an agreement with Forge Resources (ASX: FRG) to grant Forge subleases over designated areas within the Mount Weld rare earth mining leases.

Lynas owns the richest known deposit of rare earths in the world at Mount Weld, near Laverton in Western Australia.

These leases contain the Crown and Swan deposits that hold tantalum/niobium and phosphate deposits, and are considered non-core assets of Lynas.

Lynas will receive a consideration of $20.7 million cash plus an option to acquire up to 7 million ordinary shares in Forge as well as ongoing royalty payments, should Forge successfully develop the Crown deposit or the Swan deposit.

Lynas will have the right to purchase any rare earths that are produced as a by-product from the Crown/Swan deposits at international market prices, with no associated development costs to Lynas, should the deposits be developed.

In the agreement Forge is required use its best endeavours to produce intermediate rare earths by products from any development of the Crown and Swan deposits.

Forge will grant Lynas a right of first refusal to take delivery of any rare earths from any other mineral deposits that any member of the Forge Group acquires.

Also, Forge is required to raise $30 million through a capital raising.

Lynas shareholders will vote on the proposed transaction at an extraordinary general meeting likely to be held in May 2011.

Lynas Shareholders will have the opportunity to subscribe for a marketable parcel of Forge shares with a value of between $2,000 and $5,000, up to an aggregate of $12.5 million for all record date shareholders in the Forge capital raising.

If aggregate subscriptions received from all record date shareholders exceed $12.5 million a pro rata scale back will apply.

Record date shareholders will also have the opportunity to participate in any placement or other non prorata issue of Forge shares for cash consideration that Forge conducts during the 3 year period from 15 March 2011.

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