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Altan Rio Minerals Ltd has struck an equity financing deal with the European Bank for Reconstruction and Development (EBRD) which will bring a minimum of $5 million into the Mongolian-focused junior.
TSXV-listed Altan Rio holds more than 1,400sq km of ground in Mongolia with gold and copper-gold deposits its main targets. Drilling results from early 2013 on the Chandman-Yol copper-gold porphyry project in western Mongolia returned a best hit of 8.05m @ 1.77 g/t gold from 16m.
Altan Rio chief executive, Evan Jones, said the deal would allow the company to continue exploration at a time when other juniors are battening down the hatches.
“As shareholders will be aware, the ability for junior explorers such as Altan Rio to raise capital to fund ongoing activities is somewhat limited in the current market environment,” Jones said. “As such, by entering into this agreement, Altan Rio has substantially reduced financing uncertainty.”
The deal will see EBRD purchase, through a private placement, 16.66 million shares at 6c/share for $1 million as a first tranche subscription. EBRD has committed to investing a minimum of $5 million and maximum of $10 million with each subsequent tranche triggered by a notice from the company requesting funds. The size of each tranche will be dependent on the amount requested by the company and agreed to by EBRD, with the price per share to be subject to agreement between the parties based on the market price for the company’s shares at the time and the requirements of exchange policies.
Altan Rio said the funds from the first tranche would be used for exploration.
Jones told Paydirt the deal added considerable weight to Altan Rio’s shareholder base.
“EBRD is the largest institutional bank in Mongolia and we are delighted to attract a partner of that calibre. The bank is a potential cornerstone investor for the company.”
EBRD has 61 shareholders (59 governments and two international institutions) and invests in 29 countries from central Europe to central Asia. It is the largest institutional investor in Mongolia and since the beginning of its operations in Mongolia the EBRD has committed through debt and equity investments more than $US684 million to the Mongolian private sector through 52 projects in sectors ranging from banking to manufacturing and from mining to agribusiness.
Mongolia’s mining sector saw an upturn in foreign investment last decade but in recent years investors have turned away as the Mongolian Government introduced stringent local ownership laws.
Altan Rio, however, remains bullish on its prospects in the Central Asian country.
“With all emerging markets you have to weigh prospectivity against political risk but I think in Mongolia’s case the perceived risk is far higher than the actual risk. Our team of executives on the ground are very confident in its future.”
So confident in fact that Jones suggested other acquisition may be on the agenda.
“Although the political turmoil isn’t helpful I think the macro conditions are having more of an effect on share prices than anything within Mongolia itself. We see it as a perfect opportunity to get exposure to Mongolian assets because they are heavily discounted on the market at the moment.”
– Dominic Piper
Article courtesy of Australia’s Paydirt. If you would like to subscribe to Australia’s Paydirt please visit www.paydirt.com.au/subscriptions