PERTH (miningweekly.com) – ASX-listed Comet Resources will undertake a A$27-million capital raise to fund the acquisition of the Mt Margaret copper project, in Queensland, from diversified miner Glencore.

The company in April flagged the Mt Margaret buy and the possibility of raising A$50-million to fund the acquisition, but has now amended its agreements with third-party company Minerals Mining and Metallurgy (MMM) and Glencore subsidiary Mount Isa Mines (MIM) to reduce the raising requirement to A$27-million.

Under the terms of the newly amended agreement, MMM made a A$5-million non-refundable payment to MIM in February this year, and on completion of the transaction, Comet would issue 25-million of its shares at a deemed price of 20c each to MIM, amounting to a further A$5-million.

On completion of the share issue, Comet will also issue 10-million options, exercisable at 30c each with a five-year exercise date, and would provide a 2% net smelter return royalty on any copper, gold or silver extracted, produced and sold from the Mt Margaret project for the life of the operation.

On completion of the acquisition, MIM would also make a A$27-million loan available to MMM for the sole purpose of using these funds to replace the environmental bond at completion. The difference between the current environmental bond liability of more than A$32.3-million and the loan amount will be funded by Comet from the proceeds of its capital raising.

Comet previously entered into a share sale agreement with MMM to acquire all the shares in the company, in exchange for 73.55-million shares in Comet and 36.77-million options.

Comet said on Friday that the addition of the loan improves the transaction structure by reducing the size of the equity raise required to complete the acquisition, thereby reducing up-front dilution to shareholders, and allows the company time to advance and de-risk the project before further equity is raised.

Meanwhile, Comet on Friday also announced that it would undertake a A$27-million capital raise to fund the acquisition of the Mt Margaret project, the payment of the environmental bond gap, to fund interest payments on the Glencore loan and for working capital and other expenses.

The capital raise will be priced at 20c a share.

“The acquisition of Mt Margaret remains a truly transformational opportunity for Comet. It’s a substantial past-producing copper mine that we’re able to acquire due to portfolio rationalisation of a global tier one miner. It contains existing mineral resources of 13-million tonnes, with over 95% of this resource in the measured and indicated categories,” said Comet MD Matthew O’Kane.

“The majority of Mt Margaret’s resource sits in two already pre-stripped openpits providing Comet with a reduced capex pathway to production. The transaction now comprises both debt and equity, significantly improving the transaction structure for our shareholders by substantially reducing up-front dilution due to the reduction in the amount of equity required to be raised initially.”

The Mt Margaret project successfully produced from an openpit mine from 2012 until 2014, when operations were suspended owing to the copper price environment and outlook at the time.