Elemental receives $US40m equity offer

Perth-based potash explorer Elemental Minerals has received a proposal from a private equity group for a $US40 million ($A55 million) investment in the business to advance its African assets.

Mauritius-based Summit Private Equity has proposed an equity investment in Elemental of least $US40 million at 20 Australian cents per share, with the funds to be used to cover Elemental’s costs through to construction of its flagship Kola Sylvinite project in the Republic of Congo.

The proposal also includes terms of a partnership between Elemental and a construction consortium comprising French companies Vinci Construction Group, Technip France, Egis Group and Louis Dreyfus Armateurs, with a view to completing a definitive feasibility study on Kola and ultimately leading to the award of an engineering, procurement and construction contract to the consortium.

If an EPC contract is awarded under the proposal’s terms, Summit has envisaged that construction could begin at Kola within 24 months, targeting a full-scale 2 million tonnes per annum potash operation, rather than a phased approach.

If the deal is successful, Summit will also be given the right to appoint one or more directors to Elemental’s board.

In a statement, Elemental said the proposal was non-binding and would be negotiated with Summit.

“It remains subject to a number of conditions within and outside the company’s control, including due diligence, formal documentation, internal approvals by Summit and various consortium members and approval by Elemental’s board and shareholders,” the company said.

“There is a risk that one or more of these conditions may not be satisfied, and investors are cautioned against making investment decisions having regard to this proposal.

“The company believes that the Summit proposal may have merit and believes it is prudent to enter into further negotiations with Summit to see if an arrangement can be reached.”

Elemental shares were 5 per cent higher to 21 cents each at midday.