Tiger Resources (Tiger) has entered into the binding sales and purchase agreement (SPA) and Royalty Deed with Sinomine Resource Exploration Co. (Sinomine). Under the terms of the SPA, Sinomine is to acquire 100% of Tiger’s shares in its subsidiaries and its interests in the Kipoi Project, Lupoto Project and La Patience permit.
In exchange, Tiger is entitled to receive total consideration of US$260 million, comprising cash payments totalling US$250 million and the assumption of liabilities by Sinomine HK totalling US$10 million. The cash payments will be made in two instalments. The initial instalment of US$230 million will primarily be applied to the repayment of the company’s outstanding banking liabilities. The second instalment of US$20 million will be paid 3 months after the initial instalment, and is subject to typical working capital adjustments. Tiger’s total borrowings as at 30 November were US$209 million.
Under the terms of the Royalty Deed, Tiger is entitled to receive royalty payments from revenue generated from the sale of copper and cobalt by Sinomine HK of up to an aggregate amount of US$20 million.
These royalties will comprise an entitlement to:
- a 50% share of the revenue earned in excess of a realised price for Sinomine's copper sales of US$6700/t, for a period of 30 months following completion of the Transaction; and
- a 5% royalty payable on Sinomine HK’s revenue from the sale of cobalt products, during each month in which Sinomine's average realised cobalt price is more than US$50 000/t, for a period of 30 months following commissioning of the cobalt plant at the Kipoi Project in the Democratic Republic of Congo (DRC).
The Transaction is subject to a number of conditions, including:
- receiving approval from Tiger shareholders;
- obtaining certain regulatory approvals;
- no material adverse change occurring in relation to Tiger’s subsidiaries or its assets;
- agreeing a form of the escrow deed within 30 days;
- completion of the transaction prior to 30 June 2018;
- Sinomine HK’s bank and the Senior Lenders agreeing the payment mechanism and procedures for completion in order to coordinate the release of all security and establishment of new security within 30 days; and
- confirmation that each Senior Lender (in its capacity as a shareholder) intends to vote in favour of the Transaction, in the absence of a superior proposal emerging.
Tiger’s Chairman, David Frances, commented: “Over the past 12 months Tiger has faced numerous operational and financial headwinds which has led to the company being in voluntary suspension since February 2017 and requiring support from its lenders and creditors to continue operating.”
“The Board has been pleased with the progress of the operational turnaround and the rectifications that have been made to improve the performance of the Kipoi operations, as reflected in the recent increase in the tank leach throughput.”
"After careful consideration of the strategic options, the Board believes this transaction provides shareholders with the greatest certainty of value realisation and that, on balance, it is in the best interests of shareholders, employees, the Kipoi operations and the future potential of Tiger,” Frances added.
According to the company, its Directors have carefully evaluated the transaction and believe it to be in the best interests of all Tiger shareholders. The transaction allows Tiger to discharge its debts to the Senior Lenders and all unsecured banking liabilities and realise value for shareholders through net proceeds received under the cash consideration and exposure to potential future proceeds from the copper and cobalt royalties.