News blog
African Eagle Resources
- BY: Andrew Hore |
- POSTED: 24/07/2009 |
Minerals explorer African Eagle Resources is taking advantage of the easing of rules on open offers to ask its shareholders for more cash.
The EU Prospectus Directive forces companies to publish large documents when they raise more than €2.5m and these have to be approved by the FSA in the UK. However, the prospectus rules have been eased in the past year so African Eagle can raise £1.2m through a share placing without it counting towards the €2.5m limit. It does not have to publish a full prospectus, which could be a couple of hundred pages, instead the open offer document is 40 pages long. That helps to reduce the costs of raising the cash and take up less management time.
African Eagle has more than 1,000 shareholders although South African shareholders, accounting for 15% of the company’s share capital, and some other shareholders in other countries will not be able to take up shares in the open offer due to JSE and other local rules.
Managing director Mark Parker says the board was keen to offer new shares to existing shareholders because of the low share price. All the new shares are being issued at 4p each. Around one month before the cash call the shares were trading at a 12 month high of 11.5p each. “We really wanted to give shareholders a crack of the whip”, says Parker.
African Eagle will issue up to 53.875m shares through the open offer depending on take up. At 4p a share, that will raise up to £2.16m, which is the equivalent of €2.5m. Shareholders can apply for as many shares as they want.
The latest time for lodging applications for open offer shares is 11am on 6 August. The record date for the issue is 29 July so investors can still buy existing shares in order to participate in the open offer.
African Eagle’s Dutwa nickel deposit in Tanzania has potential to be a significant money maker for the company. A scoping study was completed in June 2009 and this indicates that the project is economically viable. There is 340,000 tonnes of contained nickel and 11,000 tonnes of cobalt at Dutwa and there is potential for this to increase. The value of the metal in the ground at current market prices is $8bn. Good recovery rates and relatively low acid use meant that the operating cost of the mine should be around $3/lb of nickel. That is less than half the current market price.
At the end of June 2009, African Eagle still had net cash of £1.5m. This, and the money from the latest fundraising, will be used to finance the start of a feasibility study on Dutwa costing between £1.5m and £2m and the rest will provide working capital for the company.
More cash will be needed to complete the feasibility study and the company is already talking to potential partners.
Over the next 12 months, African Eagle will undertake more drilling to the west of the Dutwa deposit, complete more metallurgical tests and try to reduce the estimated transportation costs.
At 4.125p a share, the existing share capital is valued at £8.77m.
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