EQ Resources (ASX:EQR) is set to become the owner and operator of the “largest and most advanced” ferrotungsten plant outside of China with the acquisition of Tungsten Metals Group.
The company has executed a binding heads of agreement to acquire all shares in the unlisted company and its subsidiaries.
Tungsten Metals Group (TMG) currently owns and operates the ferrotungsten plant, which has the potential to produce 4,000 tonnes per annum ferrotungsten. The facility, built in 2011, is located in Vietnam.
As part of the agreement, EQ, which has a market capitalisation of $102.92 million, has determined TMG’s enterprise value is $13.5 million.
Subject to satisfying all necessary conditions and any applicable adjustments, EQ will issue an estimated 170 million shares and pay $2.5 million in cash to acquire the company. The agreement is expected to be completed in the first half of 2025.
CEO Kevin MacNeill says this transaction aligns with the company’s strategic initiatives to be a pre-eminent western tungsten producer.
“Upon completion of the transaction, EQ will have achieved a strategic diversification of products, customers, and geography, and be proud 100% owner and operator of critical western tungsten operations on three continents,” MacNeill says.
“Additionally, EQ will have achieved vertical integration of our upstream operations, leveraging our substantial resource base and existing production output, throughout the tungsten supply chain.”
TMG Executive Chairman Tony Adcock says the board believes there are synergies that can be realised following this potential transaction.
“Bringing together TMG Group’s advanced ferrotungsten plant in Vietnam with EQ’s high-quality upstream operations represents a compelling investment case,” he says.
Following today’s announcement, EQ’s share price increased 30.43% to $0.060 as of 10.45am AEDT.
In recent years, the ferrotungsten facility has mainly operated as a toll treatment facility for third-party customers, converting primary and secondary tungsten raw materials into high-quality ferrotungsten.
Due to its scale and favourable cost structure in Vietnam, EQ says the facility is regarded as “one of the most competitive in the industry.”
The facility’s production capacity represents more than 80% of ferrotungsten capacity installed outside of China and Russia. Ferrotungsten is primarily used as an alloying agent for speciality alloys, with the defence, aerospace, and automotive industries key end markets for the product.
Both parties have agreed to an exclusivity period up until 20 December 2024. The agreement is subject to customary due diligence procedures and shareholder approvals.
EQ Resources is a tungsten mining company focused on its key assets in North Queensland and Spain.
Write to Aaliyah Rogan at Mining.com.au
Images: EQ Resources
