The critical metals producer has just secured key funding for its flagship mine.
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The Australian Strategic Mtrls (Hldngs) Ltd (ASX: ASM) share price is surging on Wednesday, up 16.76% to $8.64.
The ASM share price entered into a trading halt on Monday, pending a “material investment into the Company’s Dubbo Project”.
On Tuesday, the company revealed a major framework agreement with a consortium of South Korean investors to fund the development of Dubbo.
What’s driving the ASM share price?
The ASM share price is rallying to record highs after the company entered into a conditional exclusive framework agreement with a consortium of South Korean investors to subscribe for a 20% equity interest stake for US$250 million (A$340 million).
Included in the agreement is the provision for a ten-year offtake agreement for up to 2,800 tonnes per annum (tpa) of neodymium-iron-boron alloy from ASM’s Korean Metals Plant.
The investing partnership will see three respected South Korean private equity firms, Cerritos Holdings Co. Ltd, Kamur Partners LLC and ACE Equity Partners LLC, establish a consortium fund to acquire the 20% stake in ASM.
Alongside private equity investors, the consortium is also expected to include strategic investment from major Korean industrial companies.
What’s the funding for?
According to today’s announcement, the funds will be used to progress the development of the Dubbo Project.
ASM has described the Dubbo Project as a “large in-ground polymetallic resource of rare earths, zirconium, niobium, hafnium, tantalum and yttrium”.
As it stands, the project has “all major approvals and licences in place” and is “ready for construction, subject to financing”.
ASM said that today’s framework agreement “represents an important contribution of financial support for the Dubbo Project”.
In addition, on 28 June, the company received conditional finance support from Export Finance Australia for $200 million of debt funding. The additional funding announcement helped push the ASM share price 2.6% higher on the day.
What did management say?
ASM Managing Director David Woodall hailed the milestone:
In opening a financing pathway for the Dubbo Project, this Agreement heralds an exciting new phase in ASM’s growth and puts us one step closer to executing our ‘mine to metal’ strategy.
We are delighted our new South Korean partners have recognised the mutual value of the strategic investment opportunity represented by our integrated manufacturing capability that offers a new, cleaner source of critical metals and alloys to a rapidly expanding market. Cementing our ties with South Korea’s advanced manufacturing sector represents an incredible opportunity to create value from our Dubbo Project
ASM share price joins the $1 billion club
If the ASM share price can hold current levels, the company will hit a $1 billion valuation for the first time on record.
The ASM share price has rallied an extraordinary 107% from $4.17 on 24 March to a record high of $8.68 on Wednesday.
From a year-to-date perspective, the company’s shares are up 34%.
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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.