London broker belives Sin-Tang Development will be invaluable to Exco Resources
In a note to investors, London-based stockbroker Fox-Davies Capital said that EXCO Resources' (ASX: EXS) new Chinese investor, Sin-Tang Development, is a large backer who could help support a stand-alone mining operation at Cloncurry - even if Exco fails to agree a deal with Xstrata (LON:XTA) to use the concentrator at its Earnest Henry site 8km away.
Fox-Davies emphasised that the staged approach to the financing agreement, provides EXCO with the ability to maintain all its strategic options in the near term. The stockbroker retained its Buy recommendation, dropping its target price slightly to A$0.69/share (formerly A$0.70/share) due to the initial dilution.
Earlier today, Exco executed an agreement to raise A$4.9m through the issue of approximately 16.4 million fully paid ordinary shares at 30 cents each to a subsidiary of Singapore's Sin-Tang Development.
Funds raised from the placement will fund exploration and resource development activities at its portfolio of copper-gold Projects in north-west Queensland.
Michael Anderson, managing director, said the issue of the subscription shares is an initial step. The parties have also agreed to use their best endeavours to reach agreement in the next three months with regard to a proposed strategic investment by the subsidiary in the company's Cloncurry Copper Project in north-west Queensland.
Negotiations between the parties for the second stage will encompass both the purchase of an interest and the provision of debt financing for the project.
If agreement is reached in respect of the proposed strategic investment, it will also provide the terms on which the Subscriber may acquire further interests in the Exco's Cloncurry Copper Project and up to a further 32.9m fully paid ordinary shares (10% of the total fully paid ordinary shares currently on issue) under the same terms as the placement of the Subscription Shares.
The company expects to complete the issue of the shares to Sin-Tang on or about Friday, 13 August 2010.
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