Special Report: Independent experts have confirmed the pending merger between Metallica Minerals and Melior Mining is reasonable for Metallica shareholders and on a like for like basis that Metallica shareholders are receiving a premium going into the merged group.

For Metallica (ASX:MLM), the complementary merger with Canadian-listed listed miner Melior (TSXV:MLR) represents fast-tracked production, imminent cash flow, and a robust platform for further growth.

The Independent Expert’s Report and Financial Services Guide (IER) on the transformational merger was completed by BDO Corporate Finance.

In preparing the Independent Report, BDO relied on leading technical consultancy AMC Consultants, which confirmed the due diligence conducted by Metallica and endorsed the operating parameters of Melior’s recently refurbished and now operating Goondicum ilmenite project in Queensland.

Ilmenite is an in-demand source of titanium dioxide – which is a white pigment used in paints, fabrics, plastics, paper, sunscreen, food and cosmetics.

The IER has concluded that the merger with Melior is reasonable for Metallica shareholders.

But Metallica management believe the IER is still being too conservative in its assessments – especially when it comes to Goondicum, which will help Metallica become cash flow positive much faster compared to Metallica’s current assets.

The advantages of the merger highlighted in the IER are numerous.

Metallica shareholder ownership of the combined company would be greater than that implied by recent volume weighted average share prices of the two companies.

The merger represents the joining of two complimentary businesses with high quality projects, which means a superior market scale than Metallica on its own.

Metallica will also benefit through gaining a strategic investor and funder in Pala Investments, which is currently Melior’s major shareholder.

And because the merger is completed with scrip consideration Metallica’s cash resources are being preserved.

Importantly, the IER confirmed Melior’s project finance debt was sensible and could be comfortably managed and repaid, with sensitivity analysis and stress testing providing reasonable comfort that covenants associated with the debt will not be breached.

With the IER supporting the transformational merger with Melior, Metallica has called an Extraordinary General Meeting to be held on 7 of January, 2019.

The Directors of Metallica unanimously recommend shareholders VOTE IN FAVOUR of all of the Melior merger related resolutions at the Extraordinary General Meeting.

Fast tracking cash flow from Goondicum

The on-site components of the Goondicum construction project have now been completed on schedule and within budget, Melior told investors.

The project has started mineral commissioning, with successful first production of ilmenite and apatite occurring in the last week.

The first ilmenite shipment remains scheduled for the first quarter next year.

Goondicum is expected to generate $US92 million ($129.5 million) over its nine-year life – with $US51 million of that in the first three years of full operation.

There are also significant exploration opportunities surrounding Goondicum which could nearly double the existing mine life.

On the road to bauxite production

On November 9 Metallica announced it has signed a haul road access agreement for its Urquhart bauxite project – one of the final barriers standing between Metallica and first production.

The news comes amid growing demand for bauxite – with emerging miners like Metallica in more stable countries set to benefit.

According to CM Group, Chinese demand for bauxite will increase by 65-70 million tonnes a year over the next five to seven years, thanks to new alumina refining capacity being built and about 60 per cent of that new demand to be met by imported bauxite.

This crucial  haul road access agreement means the company can finalise a s316 mining lease that will allow it to build the haul road linking the project and the barge loading facilities at the nearby Hey Point in Queensland.

The company now expects to commence production in the first half of 2019.

Over the initial 5.5 years, Urquhart is expected to produce 6.5 million tonnes of saleable bauxite.


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