16th Feb 2016 10:29
LONDON (Alliance News) - Ferrum Crescent Ltd Tuesday said it has secured an option that could lead the company to fully acquire a private company in Spain which holds two exploration projects focused around lead and zinc.
Ferrum has secured the exclusive option to acquire GoldQuest Iberica SL by paying a "staged fee" of up to GBP22,500, in part shares and part cash. Ferrum has until the end of July this year to exercise the option, giving it time to conduct due diligence and make a decision.
If the option is exercised, Ferrum will pay GBP320,000 in cash and issue 100.0 million new shares to the sellers to fully acquire the Spanish firm.
"The board believes this is a good price for the acquisition of GoldQuest, if the option is exercised, reflecting the inherent opportunities available in the current depressed market conditions for the mining sector," said Ferrum.
Ferrum shares were trading down 12% to 0.127 pence per share on Tuesday morning.
The option has been secured from the holding company of GoldQuest, TH Crestgate GmbH, a private company based in Switzerland.
The licenses currently owned by GoldQuest cover the Toral project in the province of Leon and the Lago project in the province of Galicia. Those projects are based in northern Spain, covering lead and zinc prospects.
Ferrum has hinted that the Toral project would be the priority of the two projects it could acquire under the option.
Ferrum said it chased down the option as it was seeking more exploration opportunities to create longer-term shareholder value after its flagship operation, the Moonlight iron ore project in South Africa, secured a funding arrangement through a farm-in deal with Business Venture Investments No. 1709 (Proprietary) Ltd.
Like many commodities, iron ore prices dropped considerably in 2015 and have continued to remain under pressure this year.
"The board believes that the prevailing market prices for lead and zinc will strengthen further, underpinned by an anticipated fall in market supply," said Ferrum.
"Accordingly, it believes that the more advanced Toral project, in particular, with significant exploration data already available and being located within a politically stable and historic mining region, represents a cost effective opportunity to enter this market sector," the company added.
Ferrum said the Toral project could be advanced with only "limited exploration" combined with analysis of historic drilling at the site and said establishing an enhanced resource estimate is "considered to be highly feasible".
The miner is convinced the Toral project has been "substantially underestimated" by previous owners, with a theory that it is potentially much larger than current estimates.
"For a relatively small outlay, we believe that a focused work programme including geological and metallurgical reinterpretation, could significantly progress these Iberian exploration projects towards development readiness and diversify our project risk whilst we continue to progress our flagship Moonlight project," said Managing Director Tom Revy.
Ferrum did not provide much detail on the Lago project, which lies around 54 kilometres to the north-east of the Toral project. However, the miner said "historical investigations" by previous owners in the 1980s indicate the mineralisation at Lago could be similar to that found at Toral.
Of the 37 drill holes on the Lago project, 29 of them have intersected lead and zinc mineralisation.
By Joshua Warner; [email protected]; @JoshAlliance
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