Aspire Mining Ltd (ASX:AKM) is confident of delivering early development of the Ovoot Coking Coal Project in Mongolia after entering an agreement with a prominent Mongolian entrepreneur which includes a $33.5 million investment.
A Share Subscription Deed with major substantial shareholder, Tserenpuntsag Tserendamba, will result in a strategic repositioning for the Mongolian metallurgical coal and infrastructure company.
If approved by shareholders, Mr Tserenpuntsag’s proposed $33.5 million investment will provide Aspire with a significantly strengthened financial position as project financing discussions continue.
Set to become 51% shareholder
This would see Mr Tserenpuntsag will increase his investment in Aspire from 27.5% to emerge as a 51% shareholder.
Aspire’s executive chairman David Paull said: “This funding not only provides important equity capital but also significant in-country support and assistance with future project financing.
“It is an important recognition by Mr Tserenpuntsag of the value inherent in the Ovoot Early Development Plan (OEDP).”
This agreement stands to reposition Aspire as a Mongolian led development company as it progresses
community approvals in parallel with the OEDP, definitive feasibility study and associated road engineering study.
The placement price of 2.1 cents per share represents a significant premium of 40% to the closing price of Aspire shares of 1.5 cents per share on September 4, 2019, the last day on which shares traded before the announcement.
It also represents a 27.7% premium to the 30-day VWAP of 1.645 cents per share for the period ending September 4, 2019.
Shares up as much as 40%
Investors responded positively to the announcement with shares up as much as 40% to an intra-day high of 2.1 cents.
Paull told Proactive, “It is a means to get the project into production with sufficient capital. It is not just about the money now it is also about future money in terms of equity being more available in Mongolia.
“We are all on the same page and are all focused on the goals.”
The chairman said the agreement was good for Aspire, good for the project and good for Mongolia as a whole.
“Aim to get into production”
It was also beneficial to non-Mongolian shareholders because “bubbling along without getting into production doesn't help anybody. This breaks the cycle and gets us over the hump.”
He said, “Now we have a very powerful, financially strong Mongolian partner, who has put a lot of money on the line and his aim is to get into production.
“With these things you need access to a balance sheet. Previously Mr Tserenpuntsag put in $10 million and has also bought on-market, so his investment in us is well over $50 million.”
Importantly, Aspire will emerge post-placement in its strongest ever financial position with an estimated cash backing in excess of $40 million and no borrowings.
This placement reinforces the commitment of the Aspire Board of Directors and Mr Tserenpuntsag to transform Aspire into a significant pure play coking coal producer positioned in the second quartile of the global cost curve.
The placement is expected to provide a significant proportion of the estimated equity capital component required for the OEDP and the company understands that Mr Tserenpuntsag intends to support any future fundraising activities required to complete OEDP funding.
Paull said despite this investment and the impending 51% stake, the investor would not have board control. “It is, in reality, an Australian-Mongolian joint venture.”
He added, "The company and Mr Tserenpuntsag have a shared vision on how the OEDP can be financed and brought into production so that all shareholders can share in the realisation of this value.”
Mr Tserenpuntsag is a highly successful Mongolian entrepreneur across the food & beverage, information and communication technology (ICT), health & recreation and construction sectors.
To reflect the company’s strategic repositioning as a Mongolian majority-owned and led development company, the board and key executive team will be restructured in conjunction with the placement.
This will involve a reduction in the Board size to five members and executive chairman David Paull transitioning to non-executive chairman over a four-month period following completion of the placement.
The new executive team will be led by managing director-elect Achit-Erdene Darambazar, supported by Paull in respect of corporate and funding matters through the transition period.
A new chief operating officer will also be appointed to deliver the OEDP.
Aspire is also proposing a share consolidation of 10 to 1 to reduce the number of Aspire shares on issue.
Non-aligned directors unanimously recommend that shareholders support the placement in the absence of a superior proposal and subject to an independent expert opining that the terms are reasonable and in the best interests of shareholders.
A general meeting for this purpose is planned to be held in late October/early November.
Argonaut and MICC are acting as joint financial advisers to Aspire and its legal adviser is Corrs Chambers Westgarth.