Strategic in critical metals RTO deal with BlackRock Metals

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Strategic Resources Inc. [SR-TSXV] has agreed to acquire all the outstanding shares of BlackRock Metals Inc. by way of a reverse takeover in a move that aims to create a leading critical minerals company in a Tier 1 global mining jurisdiction with a  shareholder group that includes financier Ross Beaty.

BlackRock owns 100% of the “construction ready” BlackRock vanadium-titanium-iron project in Quebec. The mine and concentrator portion of the project is located 20 kilometres southeast of Chibougamau on traditional Cree lands within the James Bay Territory. A feasibility study is being prepared with an effective date of November 18, 2022.

The metallurgical facility portion of the project is located at Port Saguenay, a deep sea port with access to the St. Lawrence Seaway. BlackRock intends to produce a number of critical metals, including Vanadium, Titanium, and High Purity Pig Iron in an integrated operation.

As a result, the transaction provides Strategic Resources shareholders ownership of a near-term critical minerals operation that offers four decades of potential production, delivering an after-tax NPV (8%) of $1.9 billion.

The combined company will continue with the name of Strategic Resources, with a head office in Montreal, Quebec.

Strategic brings a large vanadium-iron-titanium deposit in Finland (The Mustavaara deposit) to the transaction. It will proceed by way of a share exchange where BlackRock’s shareholders will receive 280 million shares of Strategic in exchange for 100% of BlackRock’s existing common shares, representing a total consideration equal to approximately $140 million, based on a price per Strategic share of 50 cents.

It is anticipated that upon completion, Strategic shareholders will own 14% and BlackRock shareholders will own 86%, respectively of the post-transaction issued and outstanding Strategic shares (of which there are currently 44.8 million issued and outstanding).

Immediately following completion of the transaction and the offering, Strategic will consolidate the Strategic Resources shares at ratio of six pre-consolidated shares to one post-consolidated shares.

Concurrently with the transaction, the company will raise $14 million of equity through a private placement of $13.5 million worth of subscription receipts and $500,000 worth of convertible debentures. The receipts will be issued at a price of 50 cents per receipt. The offering is expected to be led by current BlackRock shareholders, including Orion Resources Partners (USA) LP, and financier Ross Beaty, who collectively have indicated an intention to contribute $11.6 million.

The participation of a shareholder of BlackRock (Investissement Quebec) in the receipts private placement is subject to approval of the Government of Quebec. Each receipt will entitle the holder to receive, upon closing, one common share of Strategic.

Under the post-consolidation capital structure, strategic shareholders will include Beaty with 1.6 million shares or a 2.7% stake.

Strategic shares were halted Wednesday ahead of the announcement. Prior to the trading halt, the shares were priced at 35 cents and trading in a 52-week range of 37 cents and 19 cents.

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