TUNGSTEN METALS GROUP LIMITED ENTERS BINDING HEADS OF AGREEMENT

TO BE ACQUIRED BY EQ RESOURCES LIMITED

TMG will hold a webinar on Monday 25 November 2024 to provide further information regarding this announcement.

Further details on how to attend will be provided separately to shareholders.

Highlights:

Tungsten Metals Group Limited has executed a binding Heads of Agreement (HoA) to be acquired by EQ Resources Limited (EQR). The transaction is contemplated as the acquisition of 100% of the shares in Tungsten Metals Group Limited and its subsidiaries (together TMG), and separately Mr. George Chen’s interest (being any and all shares) in Asia Tungsten Products Co Ltd (ATC) (ATC and TMG together TMG Group) resulting in EQR obtaining a 100% ownership of TMG Group (Transaction).

The Transaction is the culmination of the hard work and dedication of TMG to return value to its shareholders and other stakeholders following an unsuccessful IPO process earlier in 2024. The Company’s primary focus is now on execution and successful completion of the Transaction in H1 of 2025.

Completion of the Transaction will allow for vertical integration of EQR’s upstream operations with TMG Group’s state-of-the-art ferrotungsten processing facility allowing the post-Transaction business to leverage its substantial existing resource base and production output along the tungsten supply chain.

Existing TMG shareholders will be able to share in the upside of a vertically integrated tungsten business as shareholders in EQR, while also receiving the improved liquidity of an ASX-listed shareholding.

The HoA is subject to customary due diligence procedures, shareholder approvals and is expected to complete in the first half of 2025.

As the companies move towards implementation of a Scheme of Arrangement, TMG will continue to conduct business as usual, including sourcing concentrate, recycling input, and offtake agreements.

Tungsten Metals Group Limited (TMG or ‘the Company’) is pleased to announce it has executed a binding Heads of Agreement (HoA) to be acquired by EQ Resources (EQR).

TMG’s Executive Chair, Tony Adcock said, “Bringing together TMG Group’s advanced ferrotungsten plant in Vietnam with EQR’s high-quality upstream operations represents a compelling investment case for all shareholders. The TMG Board believes there are significant synergies that can be realised following this potential transaction, with the enlarged EQR positioned very well to benefit from the tailwinds in the tungsten and ferrotungsten markets globally.”

EQR’s CEO, Kevin MacNeill said, “EQR is pleased to announce the execution of a Heads of Agreement for the 100% acquisition of the TMG Group. This Transaction aligns with EQR’s strategic initiatives to be the pre-eminent western tungsten producer. Upon completion of the Transaction, EQR will have achieved a strategic diversification of products, customers and geography, and be proud 100% owner and operator of critical western tungsten operations on three continents. Additionally, EQR will have achieved vertical integration of our upstream operations, leveraging our substantial resource base and existing production output, throughout the tungsten supply chain.”

Strategic Rationale

The Transaction creates a vertically integrated tungsten focussed company with the combination of EQR’supstream operations and TMG Group’s state-of-the art ferrotungsten (FeW) processing facility allowing the post-Transaction business to leverage its substantial existing resource base and production output along the tungsten supply chain. Upon completion, EQR will consolidate its position as a leading western producer and exporter of tungsten to the world – both, in the form of tungsten concentrate and ferrotungsten. The Transaction results in a strategic diversification and providing a high-quality value-add operation, where EQR is able to provide significant feedstock to the FeW facility. FeW pricing dynamics are partly decoupled from the tungsten concentrate market (currently being EQR’s sole product) and respective ammonium paratungstate (APT) markets, which are currently EQR’s main offtake industries. EQR is aiming to utilise a certain volume of internal supply and from other supply sources to capture value in a tightening FeW market and provide additional financial returns to its shareholders in the form of value-add margin.

Transaction Overview

The parties have agreed to work together to complete due diligence and finalise definitive agreements by 20 December 2024. The TMG Board will also unanimously recommend that TMG shareholders vote in favour of all resolutions required to implement the Transaction, subject to an independent expert concluding that the scheme is in the best interests of TMG Shareholders.

The Transaction will involve EQR’s purchase:

(a) of all shares in TMG, which holds a 60% interest in ATC, by way of a Scheme of Arrangement (with the acquisition structure being subject to change); and

(b) of all Mr George Chen’s shares (who currently holds a 40% interest in ATC) in ATC by way of a share sale agreement (Share Sale Agreement); (together the Acquisition Shares).

Under the HoA, the Transaction is subject to a number of conditions precedent to be satisfied by 31 January 2025 including:

(a) the Parties each completing due diligence within the Exclusivity Period (defined below);

(b) the Parties entering into definitive agreements to document the terms of the Transaction consistent with that set out in the HoA;

(c) EQR and TMG obtaining all necessary regulatory and shareholder approvals required to lawfully complete the Transaction; and

(d) such other conditions which are customary for such a transaction of this nature (together the Conditions Precedent)

Valuation and Consideration

Per the terms of the HoA, EQR has determined that the enterprise value of TMG Group is A$13.5 million(Enterprise Value), inclusive of the Acquisition Shares (being 100% of TMG shares plus George Chen’s 40% interest in ATC) and inclusive of liabilities as of the date of the HoA. Subject to the satisfaction of Conditions Precedent and any applicable adjustments, EQR has agreed to issue an estimated 170 million new fully paid ordinary EQR shares (Consideration Shares) and make payment of A$2.5 million in cash while assuming TMG Group liabilities. The parties have agreed that if there is an adjustment to total liabilities of TMG and/or to the previously agreed deductions to the Enterprise Value, the amount of Consideration Shares to be issued shall be adjusted accordingly. Related parties and applicable advisors will be subject to a voluntary escrow restriction period of 12 months.

Exclusivity

The parties have agreed to an exclusivity period up until 20 December 2024 (unless mutually extended) in which neither party shall participate in negotiations or enter into any understanding or agreement for a competing offer or transaction. The parties shall use the period of exclusivity to conduct due diligence and negotiate a Scheme Implementation Deed (SID).

Approvals and Timing – Scheme of Arrangement

Acquisition of the shares in TMG is to be completed by way of a Scheme of Arrangement requiring various shareholder and court approvals. Assuming the scheme proceeds successfully, with no rival bids or regulatory obstacles, the Transaction is expected to be completed in approximately 4 to 5 months.

TMG will require the usual shareholder approvals to implement a scheme of arrangement. To approve the scheme, each class of TMG shareholders must pass a resolution by:

having at least 75% of the votes cast being in favour of the scheme, and
more than 50% in number of the TMG shareholders voting on the resolution.

For more information about EQR, visit https://www.eqresources.com.au/site/content/.

Released on the authority of the Board by:

Tony Adcock

Executive Chairman

About EQR

EQ Resources Limited is a leading tungsten mining company dedicated to sustainable mining and processing practices. EQR is listed on the Australian Securities Exchange, with a focus on expanding its world-class tungsten assets at Mt Carbine in North Queensland (Australia) and at Barruecopardo in the Salamanca Province (Spain). EQR leverages advanced minerals processing technology and unexploited resources across multiple jurisdictions, with the aim of being a globally leading supplier of the critical mineral, tungsten. While EQR also holds gold exploration licences in New South Wales (Australia), it aims to create shareholder value through the exploration and development of its current project portfolio whilst continuing to evaluate corporate and exploration opportunities within the new economy and critical minerals sector globally.

Forward-looking Statements

This announcement may contain forward-looking statements. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. Particular risks applicable to this announcement include risks associated with planned production, including the ability of the Company to achieve its targeted production outline due to regulatory, technical or economic factors.

Download HoA Document