ISR Capital may need up to US$15m more to carry out work in mining project

ISR Capital on Sunday said that a mining business in which it is trying to acquire a 60 per cent stake may require a further US$10 million to US$15 million of cash to carry out a new phase of work.

Among other things, this next phase includes pilot production, feasibility and engineering studies, as well as environmental impact assessments.

ISR also revealed, in response to queries by the Singapore Exchange (SGX), that the mining business, Tantalum Holding Mauritius (THM), has yet to receive a renewal of its mining licence in Madagascar even though its application was sent in December 2016.

In a filing to the Singapore bourse, ISR Capital, an investment holding company that provides private equity investment and investment advisory, stated that its S$6 million loan to THM has not been fully disbursed. As at end March this year, approximately S$660,000 of its loan to THM has not been utilised, ISR said.

Additionally, the maturity date of its loan to Tantalus Rare Earths AG (TRE AG) has not been extended and remains at Dec 31, 2018.

Following the completion of the proposed acquisition, and subject to the board's approval or any changes in the political and economic climate, ISR may direct THM to explore other ways of repaying the loan.

This includes but is not limited to converting part, or all of the loan into equity of THM, or to repay the loan once mining operations have commenced and Tantalum Rare Earth Malagasy SARL (TREM), a subsidiary of THM, is in a revenue-generating position, ISR added.

Asked by SGX how a share pledge of 60 per cent in THM for a loan of S$6 million was considered a "continuing security" when the firm is in the process of acquiring the remaining 60 per cent for S$3 million, ISR Capital said that Behre Dolbear Australia (BDA) had valued the mining project at between US$25.2 and US$74.5 million, with a most likely value of US$48.1 million as at Sept 21 last year.

Thus, the most likely value of 60 per cent of the project will be about US$28.9 million. The company is of the view that this share pledge will remain as a valid security in the event that the project is terminated.

Separately, as no approval has been granted and the company's mining licence expired in January last year, SGX queried why ISR proceeded to extend the loans to THM and TRE AG when no exploration or work may be undertaken.

With regard to this, ISR claimed that it had requested for a legal opinion from a law firm in Madagascar, Lexel Juridique & Fiscal, which stated that TREM has an "absolute and unconditional right under the Mining Code of Madagascar" to renew it licence. Thus the company understands that this renewal will "eventually be granted".

Among other things, conditions for the renewal of this licence include the commencement of research activities and the firm obtaining environmental authorisation or permits relating the activities it is carrying out.

Shares in ISR Capital last traded at 0.4 Singapore cent apiece on April 12, unchanged from the previous day's close.

Rachel Mui

16 April 2018