Phosphate developer Minbos Resources has executed a non-binding term sheet with shareholders in Petril Phosphate to acquire all of its outstanding shares.
Under Minbos's current share prices, the transaction will carry a value of approximately A$20m ($14.9m).
The company's largest shareholder will exercise A$3.85m ($2.87m) worth of options at $0.01 per share, representing an increase of 25% over the last trading price.
An additional 310 million options are exercisable by 30 December 2016 at $0.01 per share.
According to the deal, Petril shareholders will have the right to match any Minbos options exercised by 30 December 2016 to subscribe new shares at an issue price of $0.01.
When all options are exercised and matched by Petril shareholders, Minbos will raise another A$14m to develop the merged Angolan phosphate portfolio.
Both companies have equal partnership in the Cabinda Phosphate Project at Angola.
Under the transaction, Minbos will also acquire Petril's two other phosphate properties in Zaire Province, Angola, namely the Lucunga and Pedra de Feitico projects.
The Lucunga project is a joint venture with minority partner Haifa Chemicals, located near Mucula, while the Pedra de Feitico project is 100%-owned by Petril and located on the southern banks of the Congo River.
As per the ‘merger of equals’, Minbos will purchase Petril's shares in a mostly scrip transaction that will provide Petril and Minbos shareholders with 50% ownership of the enlarged company.
Minbos has also agreed to pay Petril shareholders a structured royalty from every production solely procured from Lucunga Project.
The transaction is subject to the execution of a definitive agreement and approval from Minbos shareholders in a general meeting.
The shareholders will cast their vote on the proposed transaction in early 2017.
Minbos CEO Lindsay Reed said: “After working productively with Petril shareholders over a number of years, we are pleased to welcome them on board as Minbos shareholders. With just over a year since we ceased the last set of merger discussions, a lot of the outstanding issues have now been addressed.
“The transaction consolidates and simplifies the ownership of the Cabinda Project, which is important as we complete the Bankable Feasibility Study on the Cacata Deposit.”
After the transaction, the board of Minbos will be restructured to include five members, including two nominated by Minbos and Petril and an independent chairman.
Image: Location of the Cabinda, Lucunga & Pedra project areas. Photo: Courtesy of Minbos Resources.