Entree Resources (TSX:ETG) expects to close a non-brokered private placement of up to C$39.1 million ($40 million) in the December quarter, with an affiliate of the Tether group of companies as strategic investor.
The placement covers up to 11 million units at C$2.90 each. Each unit comprises one common share and one warrant, with each warrant allowing the holder to buy one additional common share at C$3.95 for three years from issuance.
No finders’ fees apply, and insiders may participate. Closing depends on regulatory approvals, including acceptance by the Toronto Stock Exchange. All securities issued carry a hold period of four months plus one day.
Entree has signed an agreement with the Tether affiliate that takes effect on closing, giving the investor participation rights to maintain its pro rata ownership in later equity issues.
If the investor reaches and holds 15% of the company’s issued and outstanding common shares, it can also nominate one person to the board.
Entree intends to use net proceeds for general corporate purposes, including preparing an updated technical report on its interest in the Entree/Oyu Tolgoi Joint Venture Property and expanding its presence in Mongolia.
The company may also use funds to refund part of the deposit and reduce the metal credits it must deliver under its equity participation and financing agreement with International Royalty. This would happen once all outstanding issues in Mongolia are resolved.
CEO Chris Adams says the placement strengthens Entree’s balance sheet as the company works to transfer the JV mining licences to Oyu Tolgoi.
He adds that the company will also engage with the government working group and other Oyu Tolgoi project stakeholders to resolve state ownership in the area of the licences.
Adams notes that a stronger treasury gives Entree room to re-evaluate its corporate strategy.
“A healthy treasury will also afford us the flexibility to conduct a re-evaluation of our corporate strategy and, in particular, to investigate the possible merits of growth through the potential addition of value-accretive, synergistic royalties, streams, or other similar interests in high-quality copper and other critical metals projects,” Adams says.
Entree Resources is a Canadian company with a carried joint venture interest in part of the Oyu Tolgoi Project in Mongolia, one of the world’s largest copper-gold projects. It holds a 20% or 30% carried participating interest in the Entree/Oyu Tolgoi JV, depending on the depth of mineralisation.
Royal Gold (NASDAQ:RGLD), through its wholly owned Canadian subsidiary International Royalty, holds about 24% of Entree, while Rio Tinto (ASX:RIO) holds about 16%.
Write to Paula Fabe at Mining.com.au
Main image: Entree Resources
