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Broken Hill Prospecting to ring-fence funds from equity interest sale for development of rare earth project

Chairman says execution and sale of the Thackaringa project interest “solidifies what has been a significant value uplift to BPL’s shareholders.”

Broken Hill Prospecting Ltd - Broken Hill Prospecting to ring-fence funds from equity interest sale for development of rare earth project
The company is focusing its efforts on the La Paz Rare Earth Project in Arizona, USA

Broken Hill Prospecting Ltd (ASX:BPL) will ring-fence funds from the sale of its equity interests in the Thackaringa Cobalt Project for use in post-exploration development of the La Paz Rare Earth Project in Arizona, USA.

In an update to shareholders, chairman Creagh O’Connor said an initial analysis of the La Paz project by the company’s technical team had interpreted a significant increase in resources and grades.

He said geological interpretation of historical data coupled with the sampling undertaken by BPL in October 2019 had indicated a meaningful uplift in grades from the base case, which was being worked on.

Cobalt exposure retained

BPL continues to retain its exposure to cobalt, and the Thackaringa project, through the royalty based on the PFS, which has been valued at a range of around $43 million to $48 million revenue over the current life of mine, as well as BPL’s base metals exploration rights in the permit area.

O’Connor said: “The execution and sale of BPL’s remaining project interest in Thackaringa solidifies what has been a significant value uplift to BPL’s shareholders, from the decision to capitalise the project by way of COB’s spin off, to the sale completed in the last few days.

“With the retention of BPL’s royalty stream, BPL’s shareholders are well-positioned to benefit from future life of mine, and COB is well-positioned to drive the development of the Thakaringa project.”

He said the company’s balance sheet and cash position continued to strengthen.

“Following BPL’s execution of its agreement with COB and allotment of the early renounceable rights applications received, the company is in a relatively healthy cash position with $505,000 cash and a further potential maximum cash available to the company of $2.507 million.”

Early rights offer support

The chairman said the directors appreciated the early support shareholders had shown during the renounceable rights offer underway, with early applications received totalling $283,952 from new shares being issued soon after the original close date of Thursday, January 9, 2020.

All up, the company can raise up to a maximum of $2.5 million, which will be applied primarily to the La Paz Rare Earth Project.

Offer is “attractive”

He said: “With a market capitalisation of $3 million and a cash equivalent backing of $6 million, the pricing of the current offer is attractive on a cash backing basis alone without the addition of the La Paz Rare Earth Project, the royalty value of the Thackaringa Project and the Murray Basin mineral sands exploration portfolio.

“The cash equivalent component includes COB shares, which have seen some 17.2% accretion since execution of the binding heads of agreement.

“The early applications received, coupled with the number of parties that have approached the company offering assistance in finalising the capital raise, represent a very strong vote of confidence in the strategic direction directors have announced following the transition from Cobalt interests to the La Paz Rare Earth Project.”

Project details

The project is in La Paz County, Arizona, lies around 170 kilometres northwest of Phoenix and is surrounded by world-class infrastructure within a mining-friendly jurisdiction.

Initial title applications to secure the La Paz deposit comprised 107 unpatented lode mining claims on federally controlled land (Bureau of Land Management) and a prospecting permit over one section of Arizona State Trust land (259 hectares).

The tenements are unencumbered and are now 100% controlled by La Paz Rare Earth LLC, BPL’s US-based subsidiary.

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