Jervois stockpiles cash after Nyngan and Flemington royalty sale

Jervois Mining ASX JRV sells royalties to Cobalt 27
Jervois Mining sells Flemington and Nyngan royalties to Cobalt 27.

Diversified Jervois Mining (ASX: JRV) has continued its drive to stockpile cash with a lucrative A$5.98 million (US$4.5 million) royalty sale to Canadian-listed Cobalt 27 Capital Corp.

The deal sees Cobalt 27 pay A$2 million in cash to Jervois and issue A$3.98 million in Cobalt 27 shares in exchange for the royalty streams from the Nyngan scandium and Flemington cobalt-scandium-nickel projects.

The Cobalt 27 shares are subject to a four month hold period from the date of issue, but this is the only condition on the sale, which has been approved by both boards, is fully funded, binding and not subject to further approval.

Jervois will also keep a A$4 million option payment due from Flemington in the fourth quarter of 2018 that is not included in the transfer of the 1.5% gross revenue royalty for Flemington and 1.7% gross revenue royalty for Nyngan.

The sale is part of a Jervois’ strategu to offer investors more direct exposure to lithium-ion battery cathode raw materials.

Jervois retains Bullabulling, Forest Reefs and Mt Moss

In the process of putting up its royalty assets for sale, Jervois found that bidders ascribed the most value to its royalty interests on the Bullabulling, Forest Reefs and Mt Moss projects.

However, given the uncertainty surrounding plans for Bullabulling since Zijin Mining Group acquired the project in June 2015, Jervois decided it was not in shareholder’s best interests to sell the royalty stream at the existing highest offer.

The Bullabulling resource is 114 million tonnes at 1.02 grams per tonne gold for 3.8 million ounces of contained gold, of which, the Jervois royalty covers approximately 84% of this resource.

The royalty rate is A$30/oz for the first 400,000oz of gold produced and sold, then A$20/oz, thereafter.

Bullabulling Gold Limited (ASX: BGL) completed a pre-feasibility assessment for the Bullabulling deposit in February 2013, prior to its takeover by Norton Goldfields Ltd (ASX: NGL) which envisaged development of an open pit mine, with anticipated production of 1.95moz over an 11-year mine life.

Since taking over the project, Zijin has not made any public disclosures about its plans.

Cash and shares to hit A$22 million mark

After completion of the sale of the Nyngan and Flemington royalties to Cobalt 27, Jervois is forecast to end 2018 with more than A$22 million in cash and publicly traded securities.

In an ASX statement on the sale, Jervois said it was pleased to have concluded the divestment and looked forward to building a continuing commercial relationship with Cobalt 27.

“The two companies’ respective business models are viewed as complementary: Cobalt 27 focused on physical inventories, royalties and streams, and Jervois aiming to provide investors with a greater breadth of viable investment alternatives for lithium-ion battery cathode raw materials,’’ the company stated.

Jervois’ share price was steady at A$0.42 in mid-morning trade.

John is a highly experienced business journalist and formerly chief business writer for the Herald Sun. He has covered Federal politics in Canberra, was Los Angeles Bureau chief for News Limited and was also chief of staff for the Herald Sun. He has covered a wide range of small and large cap ASX stocks and has a special interest in mining, technology and biotech.