First Au’s Victorian Gold Divestment Hinges on AustChina’s Capital Raise and Approvals

• Binding Heads of Agreement with AustChina for exclusive 19-month option
• Initial non-refundable $75,000 cash plus $150,000 in AustChina shares
• Option exercise requires $200,000 cash and $500,000 in shares based on VWAP
• Deal allows First Au to focus on Nimba Gold Project (Liberia) and Gimlet Gold Project (WA)
• First Au retains upside exposure and board nomination rights in AustChina

Strategic Divestment to Unlock Value

First Au Limited (ASX, FAU) has taken a decisive step to streamline its portfolio by entering into a binding Heads of Agreement with AustChina Holdings Limited (ASX, AUH). This agreement grants AustChina an exclusive 19-month option to acquire First Au’s Eastern Victorian Goldfield Project, a move that signals First Au’s intent to unlock value from assets considered non-core to its strategic focus.

The deal involves AustChina paying an initial non-refundable option fee of $75,000 in cash alongside issuing $150,000 worth of shares to First Au. Should AustChina exercise the option, it will pay an additional $200,000 in cash and issue shares valued at $500,000, calculated using 90% of the volume weighted average price (VWAP) over 14 trading days. This structure not only provides immediate value to First Au but also retains potential upside through equity participation in AustChina.

Sharpening Focus on Core Projects

First Au’s Chairman, Daniel Raihani, emphasized that the divestment aligns with the company’s broader strategy to concentrate resources on its more promising assets. These include the recently acquired Nimba Gold Project in Liberia, where a 3,000-metre diamond drilling program is underway, and the Gimlet Gold Project near Kalgoorlie in Western Australia. By shedding the Victorian Project, First Au aims to channel capital and management attention towards these higher-growth opportunities.

The transaction also offers a non-dilutive funding mechanism, as the share consideration from AustChina does not dilute First Au’s existing shareholders. Additionally, First Au secures the right to appoint a non-executive director to AustChina’s board, provided it maintains a substantial shareholding, ensuring ongoing influence and insight into the project’s future development.

Conditions and Next Steps

The option agreement is subject to several conditions precedent, including AustChina’s successful capital raising of at least $1 million, renewal of the relevant exploration license, and obtaining necessary shareholder and regulatory approvals. AustChina has committed to allocating a minimum of $750,000 towards exploration and holding costs during the option period, underscoring its commitment to advancing the Victorian Project responsibly.

While the deal provides First Au with immediate financial benefits and strategic clarity, the execution hinges on AustChina’s ability to meet these conditions. Investors will be watching closely as the 19-month option period unfolds, particularly regarding AustChina’s capital raising efforts and regulatory milestones.

Overall, this transaction marks a pivotal moment for First Au as it repositions itself to maximise shareholder value through focused exploration and development in Liberia and Western Australia, while still maintaining exposure to Victorian gold assets via AustChina’s stewardship.

Bottom Line?

First Au’s divestment deal with AustChina sets the stage for sharper strategic focus and potential value creation, but hinges on key approvals and capital raises.

Questions in the middle?

• Will AustChina successfully complete its capital raising and license renewal to exercise the option?
• How will First Au leverage its board nomination rights to influence AustChina’s project development?
• What impact will this divestment have on First Au’s financial flexibility and exploration timelines?