Talisman Mining Limited announced that it has reached agreement to sell its Wonmunna and Uaroo iron ore projects in Western Australia in a deal which, if completed, will realize USD 34.25 million in cash and a substantial shareholding in a new Australian iron ore company.
Talisman has entered into an Option Agreement with E Com Multi Limited to grant it a three month option to purchase the Wonmunna and Uaroo iron ore projects for a consideration of USD 41.35 million, comprising cash of USD 34.25 million and shares in E Com Multi Limited to the value of USD 7.1 million.
Under the terms of the Option Agreement the option term will commence upon payment by E Com Multi Limited of a USD 2 million non refundable option fee. E Com Multi Limited has paid USD 0.5 million of this Option fee to Talisman at this time.
The payment of the remaining USD 1.5 million option fee to Talisman by E Com Multi Limited is subject to approval by E Com Multi Limited shareholders which is planned to be sought by November 11th 2010. This condition precedent must be satisfied on or before November 30th 2010.
The total USD 2 million option fee will be included in the overall cash consideration if the option is exercised by E Com Multi Limited. The exercise of the option by E-Com Multi Limited is conditional on:
1. Completion of due diligence on the Wonmunna and Uaroo Projects by E Com Multi Limited to its satisfaction
2. Shareholder approval for the exercise of the option by both companies
3. Any other statutory approvals which may be required by either party
4. E Com Multi Limited completing a capital consolidation and capital raising of up to a total of USD 45 million
The option, if granted will expire on February 12th 2011 or as otherwise agreed.
If the option is exercised by E Com Multi Limited, it will result in a major boost to Talisman's cash resources underpinning its ongoing copper gold exploration activities in the highly prospective Bryah Basin and significantly enhancing its ability to target additional new growth opportunities in the Australian resource sector.
Talisman will also retain a holding in E Com Multi Limited of between 8.7% and 9.6% on an undiluted basis post that company's recapitalization and capital consolidation, giving Talisman exposure to the future upside from the successful execution of E Com Multi Limited's Australian iron ore strategy.
Upon exercise of the option, the total sale consideration for the Wonmunna Project will be USD 41 million, comprising USD 34 million in cash, 35 million shares in E Com Multi Limited on a post consolidation basis at 20 cents per share and a 1% gross royalty on all metals produced and sold from the project.
The Wonmunna Project, which is located south of the Hope Downs and Mining Area C mining operations, east of the West Angelas mining operation and west of the Rhodes Ridge deposits in the Pilbara region, comprises an Inferred Resource of 78.3 million tonnes grading 56% Fe including a high grade Direct Shipping Ore component of 10 million tonnes grading 61.3% Fe.
Upon exercise of the option, the total sale consideration for the Uaroo Project will be USD 350,000, comprising 5250,000 in cash, 500,000 shares in E Com Multi Limited on a post consolidation basis at 20 cents per share and a 1% gross royalty on all metals produced and sold from the project.
There is also a conditional deferred milestone payment of USD 3 million upon the definition of a JORC compliant iron ore resource at Uaroo of greater than or equal to 300 million tonnes at greater than or equal to 30% Fe.
The Uaroo Project is located within the Ashburton Mineral Field approximately 370 kilometers north east of Carnarvon. Recent exploration field work has highlighted the potential of this project to contain substantial BIF hosted magnetite deposits.
E Com Multi Limited have indicated to Talisman that it considers the acquisition of the Wonmunna and Uaroo iron ore projects to be the first phase in a strategy to build a significant, stand alone iron ore business in Western Australia underpinned by access to substantial strategic funding sources.
E Com Multi Limited plans to undertake a capital reconstruction and recapitalization supported by key strategic partners in order to complete the proposed transaction and commence its growth strategy.
Also, E Com Multi Limited anticipates re-structuring its Board and Management in due course to enable it to meet and support its stated growth strategy. Initially, Mr Andrew Simpson and Ms Andy Haslam are expected to assist the E Com Multi Limited Board in a strategic and technical capacity.
The proposed transaction is consistent with Talisman's strategy of seeking to realize value from its non-core Australian iron ore assets, maintaining its focus on exploration within its high quality copper gold exploration portfolio in the Bryah Basin and pursuing new growth opportunities in copper gold, nickel and gold.
Mr Gary Lethridge MD of Talisman said that the agreement with E Com Multi Limited represented a significant opportunity to realize substantial value from its Wonmunna and Uaroo Projects. He added that "We have been working hard to pursue opportunities to realize value from our non-core iron ore assets, particularly the Wonmunna Project, for which virtually no value is attributed in Talisman's current share price. Wonmunna is surrounded by major iron ore mines operated by Rio Tinto and BHP Billiton, along with the potentially massive undeveloped Rhodes Ridge project owned by Rio Tinto and Wright Prospecting Pty Limited and we believe offers significant value to a focused iron ore company looking for strategic growth."
He added that "This proposed transaction offers substantial potential value upside for Talisman through its E Com Multi Limited shareholding, while giving us a major cash boost to support our ongoing exploration and growth activities in the Bryah Basin and elsewhere."
