ECR signs non-binding deal to sell Mercator Gold Australia

(Sharecast News) - ECR Minerals announced on Monday that it has signed a non-binding agreement with Octo Holdings for the potential sale of its wholly-owned subsidiary, Mercator Gold Australia (MGA). The AIM-traded firm said the deal, valued at AUD 4.5m (£2.24m), was structured as a cash-free, debt-free transaction and included a two-tranche payment - half on completion, and the balance by 31 March.

MGA holds the Bailieston gold and antimony exploration project in Victoria, which spans 142 square kilometres within the Melbourne zone.

The project, considered non-core to ECR's strategic focus on gold exploration, would be included in the sale.

MGA's significant AUD 75m tax losses were a key asset driving the proposed transaction.

Ahead of the sale, ECR said it planned to restructure MGA to transfer its core Creswick and Tambo gold projects, as well as associated personnel and facilities, to another ECR subsidiary.

Other Queensland-based assets, including the Lolworth and Blue Mountain projects, would be unaffected by the proposed deal.

The agreement remained subject to due diligence by Octo and the execution of a legally-binding contract.

If finalised, the transaction could also be classified as a fundamental change of business under the AIM rules, requiring shareholder approval and additional disclosures.

The exclusivity period for negotiations would run until 31 January, with a possible 28-day extension on payment of a commitment fee.

ECR said it would use proceeds from the sale to strengthen its balance sheet and accelerate the development of its core projects in Queensland and Victoria.

The company said it was confident that the combined proceeds from this sale, and the subscription announced in November, would fully fund its planned exploration and development activities in the medium term.

Legal advisers were now preparing definitive agreements, while ECR proceeded with MGA's pre-sale restructuring.

"These heads of terms represent a significant milestone in our strategy to unlock value from our Australian assets," said chairman Nick Tulloch.

"As investors will know, this has been a complex process and it is a credit to the entire ECR team that we are now at this stage."

Tulloch said that once completed, the proposed disposal would provide significant cash proceeds to strengthen the company's balance sheet, adding that the simultaneous restructuring was designed to preserve the core value within ECR without interruption to its ongoing key operations at Creswick and Tambo.

"Once the proposed disposal has been completed, ECR will be fully funded for all of its currently planned activities for the medium-term future."

At 1126 GMT, shares in ECR Minerals were down 1.69% at 0.29p.

Reporting by Josh White for Sharecast.com.