Far East Gold Ltd (ASX:FEG, OTC:FEGDF) has attracted a new strategic partner with a subsidiary of A$4 billion major Chinese miner Inner Mongolia Xingye Silver & Tin Mining Co., Ltd (Xingye) agreeing to make an investment in the company of more than A$14 million for a 19.99% stake.
The company has executed a conditional share placement agreement with fully-owned Xingye subsidiary Hsing Yip Gold (Hong Kong) Mine Company Limited for a three-tranche conditional share placement agreement.
All tranches are priced at A$0.20 per share, which represents a 47% premium to the recent placement and share purchase plan and a 21% premium to the company’s last traded price.
Shot in the arm
This investment is a major shot in the arm for Far East Gold as Shenzhen-listed Xingye, which has a market capitalisation of more than A$4 billion is the largest silver producer in China, one of the largest silver producers in the world and China’s second largest tin producer.
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Along with the significant investment, FEG, which is primarily focused on gold and copper in Indonesia, is expected to benefit from Xingye’s deep technical expertise in bringing greenfield projects through to production.
“Ticks all our boxes”
“This transaction marks the logical next step for FEG, following recent announcements around the pending Idenburg acquisition which triggered several approaches from strategic investors,” FEG chief executive officer Shane Menere said
"We are delighted to welcome Xingye as a strategic partner because it ticks all our boxes – significant funding, deep technical expertise and full alignment with our strategic goals for our portfolio of high-quality assets.”
FEG CEO Shane Menere and FEG country director Jim Gultom during a visit to Xingye's Yinman Mining Co. Ltd mine with a model of the processing plant and tailings dam.
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Combined with the recent A$4 million placement and share purchase plan, the Zingye investment will allow FEG to progress its portfolio of high-quality assets at an accelerated pace and there is potential capacity for follow-on investment.
Three tranches
The conditional placement will comprise the issue of an envisaged 71,236,739 shares at A$0.20 per share over three tranches.
Tranche 1:
- Targeting to take the subscriber’s subscription shares to approximately 9.99% of issued capital in the company.
- Indicatively, if the Tranche 1 subscription amount was paid at the date of the agreement, then this amount would be A$6,336,114.
- Falls under existing placement capacity (Listing Rule 7.1 and Listing Rule 7.1A).
- Conditions include signing Conditional Share Purchase Agreement contemplated by the Idenburg Binding Term Sheet and the subscriber obtaining various Chinese regulatory approvals.
Tranche 2:
- Targeting to take the subscriber’s subscription shares to the level where the total shares subscribed for exhaust Far East Gold’s current placement capacity (Listing Rule 7.1 and Listing Rule 7.1A).
- Indicatively, if the Tranche 2 subscription amount was paid at the date of the agreement, then the amount would be A$4,054,194.
- Falls under existing placement capacity (Listing Rule 7.1 and Listing Rule 7.1A).
- Subject to the same conditions as Tranche 1 as well as FIRB approval.
Tranche 3:
- Targeting to take the subscriber’s subscription shares to 19.99% of issued capital in the company.
- Indicatively, if the Tranche 3 subscription amount was paid at the date of the agreement, then the amount would be A$3,857,039.80
- Would exceed existing placement capacity (Listing Rule 7.1 and Listing Rule 7.1A) and therefore be subject to shareholder approval.
- Subject to the same conditions as Tranche 2 as well as FEG shareholder approval.
“A perfect fit”
Xingye chief executive officer Shucheng Zhang said: “We are pleased to make this significant investment. Far East Gold’s portfolio represents a perfect fit for Xingye’s competencies around bringing the highest-quality greenfield projects all the way through to production.
“We are looking forward to working closely with the Far East Gold team to achieve this.”
The subscriber will also be entitled to nominate one director for appointment to Far East Gold’s Board of Directors, subject to FIRB approval and completion of Tranche 2.
About Zingye
Xingye’s main business is non-ferrous metal mining and smelting, operating a full mining industry chain from geological exploration, mining, mineral processing to smelting of silver and tin.
In addition, it has also been actively exploring for copper and gold in Russia, Kyrgyzstan, Laos, Indonesia and Africa for the past five years.
Inner Mongolia Xingye Silver & Tin Mining Co. Ltd's Yinman Silver Mine in Inner Mongolia, China.
The company, which has 13 subsidiaries and 1 partnership enterprise, has diverse mineral resources and rich reserves with the main products being silver, tin, lead, zinc, copper, iron, bismuth, tungsten, antimony, gold and other non-ferrous metals, precious metals and ferrous metals.
Investor briefing
Join FEG’s non-executive chairman Justin Werner for a live investor briefing on Friday, September 6, 2024, at 11am (AEST) to hear about the details and implications of the agreement. Register here: https://fareastgold.investorportal.com.au/investor-briefing/