Zanaga Iron aligns $25M in Red Arc business

[Ben Graham]

Zanaga Iron (LON: ZIOC) has signed a binding term sheet with Red Arc Minerals that could see up to $25 million invested to advance its namesake iron ore project in the Democratic Republic of Congo towards a final investment decision.

The agreement outlines a staged investment by Red Arc Minerals, a private group founded by mining veteran Mick Davis, starting with an initial tranche of up to $25 million in cash to fund engineering and other pre-production work. That funding, to be paid in five equal sub-tranches, would earn Red Arc an aggregate 20% interest in Jumelles, Zanaga’s subsidiary and the project owner.

A second tranche gives Red Arc the option, exercisable within 18 months of completing the first stage, to pay $125 million in cash to ZIOC for an additional 67.5% fully diluted stake in Jumelles, lifting its ownership to 87.5%. If that option is exercised, ZIOC would retain a 1% net sales revenue royalty on iron ore concentrate sales, with Red Arc able to buy back half of the royalty for $50 million.

ZIOC said the structure leaves the listed company itself non-dilutive, with chief executive Martin Knauth calling the transaction a major acceleration enabled by capital that allows the project to move through the pre-production phase and towards a final investment decision.

The transaction remains subject to due diligence, the execution of definitive agreements, and approval from shareholders and regulators, as set out in the term sheet.