LONDON (ShareCast) - (Sharecast News) - Capital Metals, a mineral sands company advancing towards mine development at the high-grade Eastern Minerals Project in Sri Lanka, announced on Friday that the ASX-listed Sheffield Resources had acquired 10% of the firm.
The AIM-traded firm said under the terms of the agreement, Sheffield subscribed for 34.5 million new shares of Capital Metals at a price of 3.623p each, amounting to £1.25m.

Sheffield was also granted a 12-month option to further invest £0.84m at 4.891p per share.

Capital Metals and Sheffield also outlined terms for Sheffield to contribute funding to support the development of the Eastern Minerals Project into production.

The contribution could lead to Sheffield acquiring up to a 50% interest in the project, subject to due diligence over a 60-day period.

Capital said tat importantly, the investment was not contingent upon the outcome of the project funding decision, providing it with added financial stability and flexibility as it advanced its development plans.

As part of the deal, Sheffield could appoint a nominee director to Capital Metals' board and had the right to participate in any future share issues to maintain its percentage shareholding in the company.

While discussions with LB Group had continued positively, albeit at a slower pace, Capital Metals said it believed that entertaining alternative funding offers, such as the one presented by Sheffield, was in the best interests of all stakeholders.

LB Group had been offered co-exclusivity with Sheffield for 60 days to conclude a funding transaction with Capital Metals, substantially on the same terms as a previous memorandum of understanding.

"I am delighted to welcome Sheffield as a material and strategic investor in the company," said executive chairman Greg Martyr.

"In addition to injecting capital, they bring world-class industry expertise in the development of mineral sands projects as evidenced at Thunderbird in Western Australia.

"Their acquisition of a 10% stake in the company and interest in potentially earning 50% at the project level by contributing project funding to support the operations into production and cashflow is a reflection of the quality of the project."

Martyr said that at the same time, the company was in "regular and constructive dialogue" with LB Group, which had continued to express an interest in partnering in the project as per the terms of the memorandum of understanding.

"Today's announcement with Sheffield is significant as we now have two well capitalised and specialist industrial groups expressing an interest in supporting the project into production.

"The project has highly attractive economics with post tax net present values based on the 2022 preliminary economic assessment ranging from $155m to $235m, capex of $81m and base case total revenues of $645m over an initial 10-year project life, with clear optimisation potential and further resource growth.

"In the context of our current market capitalisation - being approximately £10m - with a post-subscription cash balance of approximately £2.5m, we are now both well-funded and in the best position to unlock material shareholder value by closing project funding with either Sheffield or LB Group."

At 1349 GMT, shares in Capital Metals were up 12.14% at 3.65p.

Reporting by Josh White for Sharecast.com.

Email this article to a friend

or share it with one of these popular networks:

• DIGG
• FACEBOOK
• STUMBLEUPON
• MIXX
• YAHOO BUZZ
• DELICIOUS
• REDDIT
• NEWSVINE