Korab Resources Locks Down $6 Million in Funding for Winchester

Australian magnesite producer Korab Resources (ASX:KOR) is now one step closer to developing its Winchester project into a raw magnesium carbonate mine. 
The company, together with is subsidiary AusMag, has entered a binding agreement for $6 million in funding with Hong Wang, who represents interests associated with the Chinese steel industry. Wang will invest $6 million into new shares of AusMag to develop the project, leaving Korab with between 70- and 75-percent ownership of the company.
On top of that, Wang has also invested $500,000 in new Korab shares, making him the company’s newest strategic investor.
Shares of Korab were up 31 percent, at AU$0.059, on Wednesday following the news. Roughly 3.33 million shares of Korab traded hands, well above the daily average trading volume for the company, which sits closer to 140,000.

Korab Resources previously announced a MOU for the agreement last month. At the time, it didn’t share the name of its new partner, only stating that the party was a “well-known, respected unrelated entity.”
Of the funding, approximately $4 million is expected to be used for development of the Winchester project. It’s expected that the remaining $2 million will be used for mine working capital and other expenditures. Wang also has a right of first refusal to provide funding for production facilities for calcined, dead burned and fused magnesia to Winchester should AusMag decide to add those capabilities. For now, the Winchester project is slated to supply raw magnesite in the form of crushed rock with no additional processing.
In return, AusMag must secure agreements for sales of 500,000 tonnes of raw magnesite rock per year for three years. The agreements must be secured within the next 12 months; Korab has already made headway on that requirement with an agreement to sell 300,000 tonnes of raw magnesite per year for five years.
Korab is also set to make a tidy profit from Winchester. The company put out its prefeasibility study for the project in January, reporting life-of-mine operating costs of AU$21 per tonne of magnesite (at an output capacity of 800,000 tonnes per year of saleable rock). Comparably, magnesite prices are currently sitting around US$80 to US$120 per tonne, according to the company’s release.
Shares of Korab Resources have gained 51.28 percent in the past month and are up 40 percent year-to-date.

 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.