Global tungsten producer EQ Resources Ltd (ASX:EQR) is set to take on a 100% interest in public unlisted company Tungsten Metals Group Ltd – a producer of high-quality ferrotungsten.

EQR has executed a binding Heads of Agreement (HoA) to acquire the shares, meaning it will take on Tungsten Metals Group and its subsidiaries (categorised together as TMG), in addition to Mr. George Chen’s interest in Asia Tungsten Products Co Ltd (ATC).

Taken together, TMG and ATC have defined as ‘TMG Group’.

The key attraction of the latter is that it owns and operates the biggest and most advanced ferrotungsten (FeW) plant outside of China – located in Vĩnh Bảo, Vietnam – which has the potential to produce 4,000 of FeW.

The facility was built in 2011, and is currently being operated as a toll treatment facility forthird-party customers, converting primary and secondary tungsten raw materials into high-quality FeW.

However, it is considered one of the most competitive in the industry, based on its scale and the favourable cost structure in Vietnam – particularly with regards to electricity usage and cost of labour.

The enterprise value of TMG Group – as per the terms of the HoA – has been estimated at A$13.5 million, with this including the Acquisition Shares (being 100% of TMG shares plus George Chen’s 40% interest in ATC) and inclusive of liabilities as of the date of the HoA.

EQR CEO Kevin MacNeill said the acquisition was in-line with the company’s vision for its future.

“This Transaction aligns with EQR’s strategic initiatives to be the preeminent western tungsten producer,” he said.

“Upon completion of the Transaction, EQR will have achieved a strategic diversification of products, customers and geography, and be proud 100% owner and operator of criticalwestern tungsten operations on three continents.

“Additionally, EQR will have achieved vertical integration of our upstream operations, leveraging our substantial resource base and existing production output, throughoutthe tungsten supply chain.”

EQR has been trading at 4.6 cents.

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