Jervois Mining (ASX: JRV) is gearing up to pursue copper and cobalt in Uganda after announcing a friendly merger with TSXV-listed M2 Cobalt.
Under a definitive agreement, the two companies will merge via an all-market transaction whereby each common share of M2 Cobalt will be exchanged for one common share of Jervois.
This represents an implied offer price of C$0.276 based on the closing price of Jervois’ common shares on January 21, 2019.
Melbourne-based Jervois is currently finalising a pre-feasibility study for its Nico Young cobalt-nickel deposit in New South Wales, but had previously indicated its intentions to pursue other growth opportunities to enhance shareholder value.
With this, Jervois said the planned merger would give the company a “transformational” foothold in Uganda through the historical Kilembe mine. M2 Cobalt’s Kilembe-area properties cover 710 square kilometres along strike of the historical Falconbridge mine.
While the arrangement has been approved by the board of directors of both companies, a successful merger will be contingent on M2 Cobalt shareholder approval, receipt of regulatory, court and stock exchange approvals, as well as Jervois being accepted for listing on the TSX Venture Exchange.
In addition, Jervois has provided M2 Cobalt with a US$3 million secured convertible bridge loan facility to improve the liquidity of M2 Cobalt until the merger is finalised.
As well as exposing Jervois to North American capital markets via a TSX Venture Exchange listing, Jervois said the merger would pave the way for an enlarged company with greater scale, liquidity and diversification.
Copper and cobalt opportunities in Uganda
Falconbridge, the Canadian-based metal company purchased by Xstrata in 2006, sold Kilembe to the Ugandan Government during the political instability of the 1970s. The operation has been closed ever since.
Between 1956 and 1977, the Kilembe mine produced more than 16 million tonnes of ore grading 1.98% copper and 0.17% cobalt.
Importantly, Jervois’ team is made up of former Xstrata/Glencore executives, including ex-Glencore executive Peter Johnston.
Jervois expects to benefit from M2 Cobalt’s established presence in Uganda, with the Vancouver-based company holding strong government and local stakeholder relationships.
From an exploration standpoint, Jervois highlighted the significant exploration potential along strike of the historical Kilembe mine.
M2 Cobalt also owns the Bujagali project in southern Uganda, which is prospective copper and cobalt. Jervois said the drill ready targets at Bujagali will be immediately funded by the convertible loan.
Commenting on the planned merger, Jervois said the agreement with M2 Cobalt came after it undertook a global search effort for attractive investment opportunities.
“Jervois has reviewed a significant number of investment opportunities in cobalt globally and is enthusiastic regarding the exploration potential of M2 Cobalt’s portfolio of tenements,” the company said.
“Uganda has a continuation of geological trends from neighbouring Democratic Republic of Congo, as well as a history of copper / cobalt production, but with greater political and regulatory stability.”
In addition to the exploration upside, Jervois’s foray into Uganda is set to complement its discussions with the government of Tanzania to win the giant Kabanga nickel-cobalt deposit.