Cyclone Metals Ltd (ASX:CLE) has secured a $1.32 million investment from CPS Capital Group Pty Ltd to fund its flagship Block 103 Iron Ore Project in the iron-rich Labrador Trough region of Newfoundland, Canada.
The funds were received through notes secured against 55 million European Lithium Ltd (ASX:EUR, OTCQB:EULIF) shares held by Cyclone, issued to CPS.
The 1.34 million secured notes carry a face value of $1.25 and are repayable in EUR shares at a 5% discount to their volume-weighted average price at CPS’ discretion after a 90-day standstill period.
“Smart” structure
“These notes provide us the oxygen to hit some major operational targets for project Block 103; whilst not diluting our Cyclone shareholders,” Cyclone executive director and chief executive officer Paul Berend said.
“They are a smart way to leverage our EUR shares; assuming that the merger between EUR and Sizzle Acquisition Corp and the subsequent NASDAQ listing is completed during the three-month standstill period.
“If this happens, and if the future EUR share price reflects the current NASDAQ valuation, our Cyclone shareholders would benefit from a higher share price of EUR shares.
“This is a nice potential upside which explains the structure of the notes but is speculative.
“The most important takeaway is that we have secured the funding to achieve key operational milestones for Block 103, which could drive substantial value uplift for our shareholders.”
Options issue
As part of the investment, 60 million options at an exercise price of $0.002 will be issued to CPS, subject to shareholders' approval.
These options will expire in two years.
As of November 13, Cyclone owned 62.8 million EUR shares valued at $4.96 million.