The ASX market closed early yesterday at 2:10PM EST however that didn't stop Korab Resources (KOR) surging 116% to $0.145 after making a price sensitive announcement at 12:20PM.
The company has announced that it is selling its Winchester magnesium project in the Northern Territory to an Estonian company for up to $33.2million. Unlike many takeover deals announced in the resources sector of late this takeover is binding between the parties and subject to regulatory approvals.
The deal will involve Augur Investments Ou paying $16.6 million in cash on closing of the deal and potentially $16.6 million in royalties from mined magnesite. On paper the deal is good, especially considering that after the share price surge Korab Resources still only has a market value of $17million. The company also has a gold and silver project in the Ukraine, gold project in Western Australia and other non-core projects.
RCR released a broker research report on the stock on the 14th of December and has a valuation price of $0.21 per share. The broker believes that the Winchester project is uneconomical so it remains to be seen if Korab Resources will actually receive any royalties in the future.
With Korab Resources currently short on funds it will be interesting to see if a capital raising is completed to get them through to the closing date of 31/03/13 for the deal.
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