Murchison Metals in A$325m sale of Crosslands Resources and OPR stake to Mitsubishi Corporation

Murchison Metals (ASX: MMX) will exit a voluntary suspension at the market open this morning on the news of a conditional sale agreement with Mitsubishi Corporation for Murchison's stake in the Crosslands Resources and the Oakajee Port and Rail (OPR) project.

Crosslands Resources is the owner of the Jack Hills Expansion Project.

Importantly for Murchison, following completion of the transaction, the company will have no ongoing exposure to the risks associated with project development, or the requirement to continue funding their ongoing development.

Murchison has agreed to continue funding Crosslands and OPR through to completion, and has agreed to support interim budgets for the period between 1 January 2012 to 31 March 2012, with its net exposure to the interim budgets capped at A$11.2 million.

This is also subject to a pro rata scale back should completion occur before 31 March 2012.


Implied value of A$0.51 per share

The implied value per share of A$0.51 represents a premium of 85% to Murchison’s last closing share price of A$0.275, and an 82% premium to the 1-month VWAP of A$0.281.

Murchison’s sale of its interests in the projects are subject to a limited number of conditions, with shareholders expected to vote to approve the sale in February 2012, with Murchison retaining the full flexibility to seek a superior proposal.

Greg Martin, managing director of Murchison, commented, "the company has tested third party interest in Murchison and its assets over recent months, and at this time it is the Board’s unanimous view that the Transaction is in the best interests of shareholders.

“The Murchison team has worked extremely hard to unlock value for its shareholders in recent months, and it is our view that the Transaction represents a solid outcome in very challenging circumstances.

"Mitsubishi has put forward an offer that represents a good financial result for Murchison shareholders, although we will also continue to pursue discussions with other parties to give shareholders comfort this is the best option available.”


Terms of the agreement - superior proposals allowed

Under the terms of the transaction, Murchison is free to continue to seek superior proposals up until the time that shareholders vote on the transaction.

A break fee of A$3 million applies in the event the Murchison board chooses to change its recommendation supporting the transaction, recommends a third party proposal or terminates the Share and Asset Purchase Agreement due to a superior proposal.

Murchison has been actively engaged in a Strategic Review process in recent months to identify the most appropriate means to extract value for its shareholders within the constraints of the significant funding requirements of the Oakajee Port and Rail development and Jack Hills Expansion Project.


Use of funds by Murchison

Murchison said that assuming that the transaction is completed, the company intends to use the funds to pay down all outstanding debts, costs of the transaction and other obligations.

The board will be considering its options as to the future of Murchison following completion of the transaction, which will include determining the most effective mechanism to distribute net proceeds to shareholders subject to further tax and legal considerations.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/22507/murchison-metals-in-a325m-sale-of-crosslands-resources-and-opr-stake-to-mitsubishi-corporation-22507.html