The funding will be repaid using the shares in EUR that Cyclone Metals own. Pic: via Getty Images.
Mining
Special Report: Cyclone Metals has secured a $1.32m investment to fund work at its flagship Block 103 magnetite iron ore project in Canada’s Labrador Trough.
Block 103’s 7.2Bt resource grading 29.2% iron makes it one of the largest undeveloped magnetite iron ore projects globally.
It also benefits from ready access to rail and port infrastructure available at the Labrador Trough – one of the largest magnetite iron ore belts on earth.
While magnetite projects typically cost a lot more to build than their hematite counterparts due to the need to process lower grade ore into a concentrate, this concentrate has very high grades.
This allows it to capture a significant premium over the 62% iron benchmark and makes it suitable for low carbon emissions steelmaking.
Cyclone Metals (ASX:CLE) started extensive metallurgical test work program on bulk sediment samples in September to demonstrate that a high-quality 69.5% iron magnetite concentrate can be easily produced from Block 103 ore.
It has also flagged the aim of procuring bulk samples of magnetite concentrate from the project ready for steel mill clients early in the new year.
Highlighting its belief in the prospectivity of Block 103, the company has stacked its management team with ex-Rio Tinto senior executives – including its chief executive officer Paul Berend and recent appointee Paul Vermeulen – to leverage their expertise in the iron ore sector.
The company has now secured $1.32m to support its operations at Block 103 through the issue of secured notes to CPS Capital Group.
However, the 1.34 million secured notes – each of which have a face value of $1.25 – are expected to be non-dilutive for CLE shareholders as they leverage securities that the company holds in European Lithium (ASX:EUR).
CLE holds 62.8 million EUR shares that are valued at $4.96m as of 13 November 2023.
Repayment of the notes, which will be in EUR shares held by CLE, will be at the note holder’s discretion after a non-repayment period of 90 days and maturity of 12 months.
“These notes provide us the oxygen to hit some major operational targets for project Block 103; whilst not diluting our Cyclone shareholders,” chief executive officer Paul Berend said.
“They are a smart way to leverage our EUR shares; assuming that the merger between EUR and Sizzle Acquisition Corp and the subsequent NASDAQ listing is completed during the 3-month standstill period.
“If this happens, and if the future EUR share price reflects the current NASDAQ valuation, our Cyclone shareholders would benefit from a higher share price of EUR shares. This is a nice potential upside which explains the structure of the notes but is speculative.
“The most important takeaway is that we have secured the funding to achieve key operational milestones for Block 103, which could drive substantial value uplift for our shareholders.”
This article was developed in collaboration with Cyclone MEtals, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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