Australian diversified resources company Reed Resources Ltd (RDR) (“Reed”) is pleased to announce the conditional sale of its subsidiary Kalgoorlie Ore Treatment Company Pty Ltd (“KOTC”) to MacPhersons Reward Gold Limited (MRP) (“MacPhersons”) pursuant to a binding memorandum of understanding (“MOU”). KOTC holds Reed’s Nimbus processing plant and associated assets near Kalgoorlie.
The sale which remains subject to due diligence will see MacPhersons pay cash and scrip consideration of $4.5 million (A$3M cash and A$1.5M in MRP ordinary shares) plus reimburse Reed for up to $500,000 of costs associated with power line installation and ball mill upgrade prior to the contract becoming unconditional. MacPhersons will pay a deposit of $100,000 to secure the contract which includes a 3 month due diligence period, during which time certain permitting approvals are to be obtained. The deposit is non-refundable except if those approvals are not obtained. The parties are to enter into a formal sale agreement to reflect the terms of the binding MOU. Settlement will occur within 5 business days of the completion of successful due diligence and receipt of permitting approvals. Reed will retain a 1% Net Smelter Royalty on zinc production from KOTC’s two mining leases. KOTC was acquired in April 2009 for A$2.5M, with approximately A$1M spent on refurbishment and rehabilitation activities. On this basis Reed will book a circa A$1M profit on the sale of this asset.
On the sale of the Nimbus assets, Reed Managing Director, Mr Chris Reed said: “In short, ownership by Reed of this asset has become non-core, provided treatment access for Reed’s Sand Queen ore can be preserved. This disposal has the dual benefit of retaining a treatment option for Sand Queen whilst relieving the group of the capital cost and management time of the Nimbus refurbishment process.
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