April 09, 2015

NIKL to buy Isabella project and invest in NiHao

In a disclosure to the exchange, NiHao Mineral Resources International Inc (NI) have decided to enter into a transaction, pending the completion of due diligence by Nickel Asia Corp (NIKL) and authorizations from the respective board of directors of both companies. The transaction includes:

 - The purchase of100% of the Isabela project by NIKL for a total consideration of P720m with NI retaining a 20% profit share from the project. The Isabela project consists of an aggregate area of 2,391 hectares and is covered by MPSA 258-2007-II. NI is currently the operator and general contractor of the project wherein NI mines nickel saprolite and limonite ore for direct shipment and export from the Philippines.

 - The purchase of at least 10% of the total issued and outstanding stock of NI by NIKL at P4.00 per share from a group of existing and controlling shareholders of NI. NI shall, in return, grant NIKL the exclusive preference and priority to develop NI’s other mining properties which include Mina Tierra Gracia with an aggregate area of 5,081 hectares, Bountiful Geomines Inc which has an aggregate area of 1,944 hectares and Masbate 13 Philippines which covers 4,136 hectares. Should NIKL proceed and develop any of the aforementioned properties, it will be subject to the same terms and conditions as the Isabela project.

Our take: While we reserve judgement pending further details of the acquisition, we would like to note that the acquisition enables NIKL to effectively deploy its huge cash pile. The additional production and sales from the Isabela project should help cushion the effect of lower nickel ore prices to NIKL’s bottom line. – WealthSec