Mont Royal Faces Dilution and Regulatory Hurdles in Merger with Commerce Resources

Mont Royal’s Strategic Capital Raise and Merger

Mont Royal Resources Ltd (ASX, MRZ) has taken a significant step forward by lodging a prospectus to raise a minimum of A$8 million and up to A$10 million through the issuance of new shares priced at A$0.20 each. This capital raising is intricately linked to a proposed merger with Commerce Resources Corp (TSXV, CCE), a Canadian junior mineral resource company focused on rare earth elements and fluorspar.

The merger, if approved by shareholders and regulatory bodies, will create a Quebec-focused critical minerals company with a diversified portfolio of assets. Mont Royal brings to the table its 75% interest in the Northern Lights Project, an exploration-stage lithium, copper, and gold project located in the James Bay region of Quebec. Commerce contributes its flagship Ashram Project, a rare earth elements (REEs) and fluorspar deposit with a JORC-compliant mineral resource estimate of 204 million tonnes grading approximately 1.9% total rare earth oxides (TREO) and 4.9% calcium fluoride (CaF2).

Advancing the Ashram Project

The funds raised from the public offer will primarily be directed towards advancing the Ashram Project through the completion of a preliminary economic assessment (PEA), environmental baseline studies, and a prefeasibility study. These studies are critical milestones that will help define the project's economic viability and pave the way for future development. The Ashram deposit is notable for its simple mineralogy dominated by monazite, bastnaesite, and xenotime, and its potential to produce high-grade rare earth concentrates with promising metallurgical recoveries.

In addition to rare earths and fluorspar, the Ashram Project hosts exploration prospects for niobium and tantalum, which could provide valuable by-products and enhance the project's economics. The project benefits from strong Canadian government support, including grants and funding for infrastructure studies, underscoring its strategic importance in the critical minerals sector.

Northern Lights Project Exploration Potential

Mont Royal’s Northern Lights Project remains an early to advanced exploration asset with promising lithium mineralisation evidenced by spodumene-bearing pegmatites and supportive geochemical signatures. The project also holds potential for copper and gold mineralisation, particularly volcanogenic massive sulfide (VMS) deposits, which tend to occur in clusters and could lead to multiple discoveries. The company plans to allocate a portion of the raised funds to continue targeted exploration activities at Northern Lights.

Governance and Market Reinstatement

The proposed merger and capital raising represent a material change in Mont Royal’s nature and scale of activities, necessitating shareholder approval and re-compliance with ASX Listing Rules. The company’s shares have been suspended since February 2025 and will seek reinstatement to official quotation on ASX following successful completion of the transaction and capital raise. The merged entity also intends to list on the TSX Venture Exchange (TSX-V), providing dual listing benefits and enhanced liquidity.

Governance changes include the appointment of a new board comprising experienced directors with backgrounds in mining, project delivery, and capital markets. The company has engaged Canaccord Genuity as lead manager for the public offer, supported by co-lead and co-managers, and has secured independent technical and financial assessments to underpin the transaction.

Risks and Considerations

Investors should be aware of the inherent risks associated with the transaction and the mining sector. These include dilution risks from the significant issuance of new shares and options, regulatory and permitting challenges in Quebec, exploration uncertainties, and the need for ongoing capital to advance project development. Market risks related to commodity price volatility, especially for rare earths, lithium, copper, and gold, also apply. The company’s financial reports highlight material uncertainties regarding going concern, contingent on successful capital raising and project advancement.

Despite these risks, independent technical experts have validated the quality of the Ashram Mineral Resource and support the staged development approach. The capital raise and merger position the combined company to capitalize on the growing demand for critical minerals essential to clean energy technologies and advanced manufacturing.