HOPGOOD GANIM is assisting mineral resources firm Metallica Minerals to secure a $4.62 million investment from China’s largest alumina refinery.
Chiping Xinfa Huayu Alumina has taken an option agreement to acquire 10 per cent equity in bauxite exploration company Cape Alumina Pty Ltd, which is jointly owned by Metallica. Once the option is taken, Metallica will retain 40 per cent of Cape Alumina.
Hopgoods’ corporate advisory partner Michael Hansel, together with Penny Gibson, oversaw the agreement. Hansel said this approach was often taken by Chinese and other foreign investors seeking to take advantage of Australia’s resource market.
Because Metallica are in the exploration phase, they need to get investment from strategic partners or they will “burn through their cash too quickly”, he said.
“Their model is to get in, say, a bigger player in the market where they then can earn from any project by spending the exploration money, without Metallica having to spend any money up front, and then see whether it can go any further to commercial development,” Hansel said.
He said Chiping Xinfa has seen initial results of the exploration, and they have taken an “option” to secure a stake in any actual finds.
“Metallica at present owns 50 per cent of Cape Alumina. If Xinfa exercises the option, they will then have to pay Metallica the $4.62 million to take 10 per cent of Metallica’s stake,” he said.
“As China seeks to expand its capital operations around the world, rather than incur significant start-up costs, they would look at taking strategic positions in potentially high growth entities that are working towards bankable feasibility or production.”