Fox Resources: Fox Resources raises up to $4.2M, underwriting from Terry Streeter

Fox Resources (ASX: FXR) is raising about $4.2 million through a fully underwritten one for two entitlement offer to repay debt and for working capital.Notably, Jungle Creek Gold Mines – an entity controlled by Fox chairman Terry Streeter – will underwrite up to 230,194,837 new shares priced at $0.015 each or approximately $3,452,923.Other creditors have also agreed to underwrite the balance of the Offer, with most of their underwriting obligations also to be set off against a total of $663,983 in debts owed to them.     Underwriting commitments of $107,500 will be met in cash.Fox managing director Paul Dunbar said Jungle Creek’s support allows the company to advance its projects and has resulted in its estimating a maiden 101 million tonne Inferred coking coal resource for its Bundaberg project.“The Offer will allow eligible shareholders to participate in a capital raising at the same price which Jungle Creek’s debt will be converted to equity, and avoid dilution. The issue price under the Offer is a discount to what the Company’s directors to be the true value of the Company’s shares.”Non-renounceable Entitlement OfferThe offer to raise $4.224 million is priced at $0.015 per new share with 1 free attaching two year option exercisable at $0.04 for every new share subscribed for.Given that Streeter currently holds 16.56% of the company’s shares and that Jungle Creek may acquire up to 38.29% of Fox as a result of underwriting the offer, shareholder approval will be sought for the underwriting at a meeting to be held in June 2014.Fox is currently indebted to Jungle Creek for approximately $7,059,159.341 under various loans. Jungle Creek has requested under the terms of loans, 50% of the balance of these loans be secured over the company’s assets. Approval for this will also be sought at the forthcoming EGM.Subject to shareholders approving the underwriting and security, Jungle Creek has agreed to extend the due date of repayment of the balance of the debt from September 2014 for a further 12 months.Bundaberg ProjectFox Resources had recently defined an Inferred Resource of 101.2 million tonnes of coking coal at its Bundaberg Project (EPC1523) in the Maryborough Basin in Queensland.This is nearly three times larger than International Coal’s (ASX: ICX) coal resource in the adjacent EPC2196.Raw calorific values exceeded 7,000KCal/kg for large sections of the seams while the raw crucible Swelling Index numbers of 8 to 8.5 were similar to those released by ICX in EPC2196 to the north, ranking the coal amongst the highest quality coking coal in the Bowen Basin.Coal Quality Sampling from Fox 6 is focused on generating two composite clean products, one at CF1.45 and the other at CF1.60 and testing these for a range of coking and thermal properties.In addition, Fox had in early April identified a significant strike extension to the coal seams with an Exploration Target of 20 million to 50 million tonnes.The company has benefitted from an information sharing arrangement it struck with ICX for their adjacent hard coking coal projects.This has already removed the need for infill drilling and could lead to a joint development in the future.AnalysisJungle Creek’s financial support for Fox Resources is a significant pointer to the upside it perceives in the company, this time underwriting the majority of the $4.224 million non-renounceable one for two entitlement offer.That other creditors have chosen to support the balance of the offer highlights their confidence in the company and the Bundaberg Coking Coal Project.While Fox has identified an Inferred Resource of 101Mt of coking coal at the project, there is room to grow with the Exploration Target of between 20Mt and 50Mt providing a potential initial direction for future exploration.Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX “Small and Mid-cap” stocks with distribution in Australia, UK, North America and Hong Kong / China.