Subiaco-based Chrome Corporation will move into the gold sector after it struck a deal to acquire Papua New Guinea explorer Pacific Nuigini Minerals.
Shares in Chrome were up half a cent to 7 cents at 13:38 AEST.
Pacific has almost 4,000 square kilometres of prospective land in PNG's Morobe, Western Highlands and Madang Provinces. Pacific also has around $400,000 in cash.
Additionally, Chrome said up to two nominees from Pacific's board may be appointed to its board.
Newly appointed Metals X chairman Peter Cook has agreed to be one of the nominees.
Chrome said it has sufficient funds to meet the $4 million exploration spend planned by Pacific.
The acquisition follows Chrome sale of a 53 per cent stake in its Ruighoek chrome project in South Africa to AMCOL International Corporation (AIC).
The remaining 47 per cent interest held by Chrome is subject to a put and call option arrangement with AIC over the next two years.
AIC has the right to exercise the call to purchase Chrome's remaining interest at any time within the next 24 months.
A monthly option fee of $US75,000 is payable by AIC to Chrome for the first 12 months, and will increase to $US150,000 a month in the second 12 months.
Should AIC not exercise its call option within the allotted time, Chrome has the right to put its remaining shares in the project to AIC for $US12.4 million.
The announcement is below:
The deal, which is subject to due diligence and the approval of Chrome shareholders, will transform Chrome into a substantial gold company with almost 4,000 sqkm of highly prospective acreage in PNG's Morobe, Western Highlands and Madang Provinces. The PNM portfolio boasts several significant exploration projects, including the Bulolo alluvial gold project, which is well known as the historical birthplace of Placer Dome, producing more than 2 million ounces of gold from dredging up to the mid-1990s.
PNM is owned and managed by highly regarded technical people based in PNG with substantial on-ground presence. Its owners also include the founders of gold miner Abelle Limited, which in recent years was responsible for the huge success enjoyed at the Wafi, Golpu and Hidden Valley Projects, leading to a takeover by Harmony Gold. As a result of the all-scrip bid, these investors will become significant shareholders in Chrome.
PNM brings to Chrome two highly respected PNG mining executives. PNM is headed by prominent PNG geologist David Osikore and is chaired by Bill Searson, a well-regarded figure in the PNG resources and government sectors.
PNM also has about $400,000 in cash.
Chrome has agreed, subject to securing all the approvals, to issue to PNM shareholders two (2) fully paid Chrome shares for every one (1) PNM share and to PNM option holders one (1) option to acquire a Chrome share at a price of 20 cents, expiring on June 30, 2014, conditional on Chrome acquiring 100% of the shares and options on issue in PNM.
PNM has 17,950,100 shares and an equal number of 5-year 20 cent options on issue.
Chrome has agreed that on completion of the transaction, up to two nominees of PNM may be appointed to the Chrome board. Mr Peter Cook, Chairman of Metals X Ltd and Aragon Resources Ltd and a Director of Westgold Resources Ltd has agreed to be one of the PNM nominees.
The deal will see the number of Chrome shares on issue rise from 167.3 million to 203.2 million, an increase of 17.67%. A general meeting of shareholders to approve the transaction will be called as soon as possible.
Chrome believes that these quality assets in such a prospective location as PNG give it a significant opportunity to make an advanced investment in the gold industry.
Chrome Managing Director Brian Thomas said: "The geological prospectivity of these tenements is second to none. They include ground close to PNG's latest mega gold mine, Hidden Valley. The Bulolo tenement covers an area which has already been one of the most prolific producers in PNG's gold history and the birthplace of one of the world's major gold miners, Placer Dome. Exploration work completed by PNM to date has yielded very encouraging results. We look forward to advancing these projects with David Osikore and the rest of the PNM team."
As has been announced previously, CCI sold 53% of its interest in the Ruighoek Chrome Project in South Africa to AMCOL International Corporation ("AIC"). The remaining 47% interest held by Chrome is subject to a Put and Call Option arrangement with AIC which has a term of 24 months from the first-stage settlement in February 2009.
AIC has the right to exercise the Call to purchase Chrome's remaining 47 per cent shareholding in the project at any time within the 24-month period. A monthly option fee of US$75,000 is payable by AIC to CCI for the first 12 months, increasing to US$150,000 a month in the second 12 months.
Should AIC not exercise its Call within the 24-month period, Chrome has the right to Put its remaining shares in the project to AIC for US$12.4m within 60 days after the expiry of the 24-month term. A fee of US$300,000 is payable by Chrome if it exercises this Put. There is no obligation for AIC to exercise the Call before the expiry of the 24-month term of the Option arrangement. This may mean that Chrome will not receive final settlement until at least April 2011.
Chrome has sufficient funds to meet about A$4 million in exploration expenditure planned by PNM.