Morien Resources (TSX VENTURE:MOX) said Dec. 12 that it has entered into an agreement with Kameron Collieries ULC to exchange its 25% working interest in the Donkin Coal Project in Cape Breton, Nova Scotia, for C$5.5m in cash and a production royalty on sales from the Donkin project.
Kameron has also agreed to pay Morien a gross royalty of 2% on the first 500,000 tonnes of coal sales per calendar quarter and 4% on any tonnage thereafter from the Donkin project. The transaction is subject to approval from Morien shareholders and from the TSX Venture Exchange.
Additionally, Morien has entered into a private placement agreement with Atlantic Royalty LLC, a related company to Kameron, for 3.45 million shares in Morien at C$0.30 per share for gross proceeds of C$1,035,000. This private placement is subject to the approval of the TSXV.
Kameron and Atlantic are subsidiaries of The Cline Group LLC, a private coal company that controls over 3 billion tons of reserves in the Illinois and Northern Appalachian coal basins. It was founded by coal operator Chris Cline. Kameron recently purchased Glencore‘s 75% interest in the Donkin project, and this latest deal now gives it full control of the project.
Morien said its management has dedicated substantial resources to evaluating various options for the advancement of the Donkin Project and believes the proposed transactions will deliver significant value for its shareholders while reducing financial risk and further shareholder dilution. Morien intends to schedule a special meeting of shareholders in February 2015 to obtain the required approval for the agreement.
Morien currently holds a 25% minority interest in one of the largest undeveloped coal deposits in North America, which is the subject of the proposed transaction. The Donkin underground project is fully permitted and is located within 30 kilometres of a deep water port in Sydney, Nova Scotia. “Underground” is something of a lose term to describe this mine, since mining will start from entries on coastal land then quickly move under the seabed of the Atlantic Ocean. This type of undersea mining has been done in the past in this area.