Further to its ASX announcement of 4 April 2022, Comet Resources Limited (Comet or Company) (ASX: CRL)(Comet or Company) (ASX: CRL) is pleased to announce that it has executed an amended binding agreement to acquire a 100% interest in the Mt Margaret Copper Project and associated regional tenements near Cloncurry, Queensland (Project or Mt Margaret) from Mount Isa Mines Limited, a wholly-owned subsidiary of Glencore Plc (Acquisition).

HIGHLIGHTS:

• Comet to acquire 100% of Mt Margaret Copper Project from Glencore under improved transaction terms
• Company will now raise $27m to fund acquisition and initial post-acquisition pre- development activities – Equity component of the raise is now reduced due to addition of debt financing (see below)
• Equity raise includes a $5m priority offer to existing Comet shareholders
• Glencore now to provide 3-year loan of $27m to Comet – Inclusion of the loan delivers Comet shareholders substantially reduced up front dilution
• The Mt Margaret Copper Project successfully produced from open pit mining from 2012 until 2014, when operations were suspended due to the copper price environment and outlook at that time
• Located only 7km from key processing infrastructure at Ernest Henry, where Mt Margaret ore was previously processed into export quality copper concentrate
• JORC open-pit Resources of 13.0Mt at 0.78% copper and 0.24g/t gold with >95% in the Measured and Indicated categories¹
• Near-term production potential – 2 open pits already pre-stripped
• Significant potential for Resource growth through further exploration
• Defined high priority exploration targets – Both extensional and regional

Managing Director, Matthew O’Kane commented, “The acquisition of Mt Margaret remains a truly transformational opportunity for Comet. It’s a substantial past-producing copper mine that we’re able to acquire due to portfolio rationalisation of a global tier one miner. It contains existing Mineral Resources of 13.0Mt, with over 95% of this resource in the Measured and Indicated categories. The majority of Mt Margaret’s Resource sits in two already pre-stripped open pits providing Comet with a reduced capex pathway to production. The transaction now comprises both debt and equity, significantly improving the transaction structure for our shareholders by substantially reducing up front dilution due to the reduction in the amount of equity required to be raised initially.”

ACQUISITION OVERVIEW

Comet has entered into an amended and restated share sale agreement (MTM Acquisition Agreement) with Minerals Mining and Metallurgy Limited (ACN 645 972 309) (MMM), Mount Isa Mines Limited (ACN 009 661 447) (MIM) and Mount Margaret Mining Pty Ltd (ACN 150 366 224) (MTM) pursuant to which MIM has agreed to sell, and MMM has agreed to buy, 100% of the issued capital in MTM (MTM Shares). MTM is the owner of the Project. Neither MMM, MIM or MTM are related parties of the Company.

The consideration for the acquisition of the MTM Shares is:

(i) a non-refundable payment by MMM of $5,000,000 to MIM (paid on 18 February 2022);
(ii) on completion, the issue by Comet (such issue to be procured by MMM) of 25,000,000 fully paid ordinary shares in the capital of Comet (Shares) to MIM (or its nominee) (at an aggregate deemed issue price for those Shares of $0.20 per Share, equal to an amount of $5,000,000;
(iii) on completion, the issue by Comet (such issue to be procured by MMM) of 10,000,000 options exercisable at $0.30 per option on or before the date which is 5 years from issue; and
(iv) a 2% net smelter return royalty from the sale of any copper, gold or silver extracted, produced and sold from the Mount Margaret Project for the life of the mine.

At completion of the Acquisition, MIM has agreed to make a loan available to MMM in the amount of A$27,000,000 (the Loan) for the sole purpose of MMM using these funds to replace the Environmental Bond at completion. The difference between the current Environmental Bond liability of A$32,341,120 and the Loan amount will be funded by Comet from the proceeds of its capital raising. The addition of the Loan improves the transaction structure by reducing the size of the equity raise required to complete the Acquisition, thereby reducing up-front dilution to shareholders, and allows the Company time to advance and de-risk the project before further equity is raised. Options for re-payment of the Loan at maturity include future equity raises, repayment via alternative debt financing or cash flows from operations should the Company return the Project to production, or a combination thereof. A decision will be made on the method of repayment of the Loan in the future.

The Loan will have the following material terms:

(i) Term: the Loan must be repaid on the date that is 36 months from the date the Loan is advanced to MMM (or earlier at MMM’s election);
(ii) Interest: interest on the Loan will accrue at a rate of the bank bill swap rate (BBSW) BBSW + 900 basis points per annum, payable quarterly in arrears;
(iii) Security: the Loan (and interest) will be secured by a first-ranking general security deed over the assets of MMM and Comet;
(iv) Bond Increases: during the term of the Loan, MMM will meet any increases in the Environmental Bond imposed by the Queensland Government; and
(v) Oversight by MIM: During the term of the Loan, MMM will provide MIM with access to such information, as it may reasonably require, in order to monitor MTM’s exploration activities on the Mount Margaret Project.

In addition to the Environmental Bond, the Project is also the subject of a Deed of Arrangement for Offset Transfer between the State of Queensland and MTM (Offset Deed) which relates to requirements under the “Queensland Biodiversity Offset Policy”. Pursuant to the Offset Deed, MTM has provided financial security to the State of Queensland in the form of an unconditional bank guarantee for the amount of $1,983,000 (Offset Surety). The Offset Surety will also need to be replaced as part of the Acquisition and $2,000,000 raised under the Capital Raising will be allocated towards this.

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