Nickel developer Ring of Fire Noront Resources has turned down a loan from potential bidder Wyloo Metals and will opt for private placement funding instead.
Noront will place 21.66 million shares at $ 0.283 each to generate gross revenues of approximately $ 6.1 million.
Noront has “an urgent need for funding,” the company said in a statement on Friday, noting that the proceeds will be used to cover its short-term working capital obligations and the remaining funds will be used to promote its real estate portfolio.
Late last month, Wyloo, which owns 23% of the shares, announced its intention to make an offer for Noront and indicated that it would provide a convertible loan of $ 5 million to meet the acquisition target.
Noront, however, said that its board of directors, with the help of external consultants, determined that additional debt without the ability to pay off in the near future is not recommended for a development company with no operating income.
Regarding the proposed proposal, Noronto also indicated that Wyloo was not allowed to apply for the takeover until the formal appraisal was completed by an independent appraiser.
Under the investor rights agreement between Noront and Wyloo, Wyloo will be eligible to acquire common shares to maintain its proportionate share in the company, calculated on a partially diluted basis. If Wyloo fully exercises its right of funding, an additional 12.53 million shares will be issued to Wyloo Canada for an additional $ 3.5 million in gross revenue.
Baosteel Resources also has a replenishment right which, if sold in full, could result in an additional 1.96 million shares worth $ 0.55 million.