Fortescue invests in Magmatic

Andrew Forrest-backed Fortescue has acquired a 19.9 per cent stake in Magmatic Resources, in addition to its farm-in, joint venture agreement with the company at its Myall project in New South Wales.

This news resulted in Magmatic's shares rising 46 per cent on Friday morning, to 6.6 cents per share. 

Under the placement acquisition, Fortescue will subscribe for approximately 75.9 million shares in Magmatic, a gold-copper exploration company, at a price of 4.8 cents per share, which will raise around $3.71 million. 

"Fortescue’s cornerstone investment in Magmatic will allow the company to simultaneously advance our other two projects at Wellington North and Parkes which are strategically located near Alkane Resources Boda-Kaiser deposits and Tomingley gold operations respectively," executive chairman David Richardson said. 

Upon completion of the placement, a series of conditions will also apply.

While Fortescue's stake in the company remains under 20 per cent, it will have an opportunity to appoint a nominee director to Magmatic's board - should it increase beyond 20 per cent, an additional nominee director can be appointed. 

Magmatic has also provided an undertaking that it will endeavour to involve Fortescue in the issuing of its securities.

As part of the farm-in, joint-venture agreement between both parties, Fortescue will invest up to $14 million over six years, which will ensure it will eventually hold 75 per cent ownership of Myall, which is located on the northern extension of the Junee-Narromine volcanic belt, in the state's central west region.

During the initial farm-in period, which is up to four years, Magmatic will operate the project. Fortescue is able to withdraw from the agreement inside the initial two years if it has met minimum obligatory requirements. 

However once Fortescue secures a 51 per cent interest in Myall, the joint venture component will begin and it will solely fund and manage Myall's exploration activities.