Noront Resources (TSXV: NOT) has rejected a loan offer from major shareholder and Australian mining magnate Andrew Forrest’s Wyloo Metals late last week, citing an “immediate need for funding.”
Instead, Noront, the largest landholder of Ontario’s emerging Ring of Fire nickel and chromite camp, opted to pursue a private placement financing to address its near-term working capital commitments, with the remaining funds to be used to advance its portfolio of properties.
A welder working at Noront Resources’ Esker exploration camp in Ontario’s Ring of Fire region. Credit: Noront Resources.
Noront will place 21.66 million shares at 28.3c each to raise gross proceeds of about $6.1 million.
On May 25, about 23%-shareholder Wyloo announced its intention to make an offer for Noront and indicated that it would make available a $5 million convertible loan to its takeover target.
Noront said that its board, with the input of external advisers, had determined taking on additional debt was not advisable for a development company that did not generate operating revenue.
Regarding the proposed offer, Noront also pointed out that Wyloo was not permitted to start a takeover bid until an independent valuator completed a formal valuation.
Under an investor rights agreement between Noront and Wyloo, Wyloo would be entitled to acquire common shares to maintain its pro-rata equity interest in the company calculated on a partially-diluted basis. If Wyloo exercises its top-up right in total, an additional 12.53 million shares would be issued to Wyloo Canada for additional gross proceeds of $3.5 million.
Baosteel Resources also has a top-up right, which, if exercised in full, could result in an additional 1.96 million shares being issued for US$550,000.
Wyloo is owned by Tattarang, a holding company for Australian billionaire Andrew Forrest’s family interests.
Wyloo currently holds a 23% stake in Noront, a US$15 million convertible loan maturing at the end of September, and a 1% net smelter return (NSR) royalty on Eagles Nest, acquired from Resource Capital Funds in December. Its proposed offer of US$133 million for the remaining Noront shares represents a 31% premium, based on the junior’s trading price as of May 21.
Wyloo had not yet made an official offer, prompting Noront to implement a shareholders’ rights plan, effective May 26, to protect it against creeping bids and ensure all shareholders are treated fairly.
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