The Kiwanda convertible notes will convert into Phillips River shares after the merger of Kiwanda and Phillips River has occurred.

In a presentation issued last month, BBY said the investment has a return “consistent with a pre-IPO funding”, as a $A10,000 investment in Kiwanda notes will convert into about $22,200 of Phillips River shares at $0.30 upon re-listing, though of course Kiwanda does not guarantee that Phillips River shares will trade at the issue price.

Kiwanda, which acquired a controlling 19.9% stake in Phillips River in March last year and appointed new directors to its board, has already issued over $1.5 million worth of its convertible notes to investors.

Phillips River has been suspended from trading on the Australian Securities Exchange since agreeing last year to acquire assets from Kiwanda Mines and its TSX Venture-listed partner Lara Exploration.

BBY said Phillips River needed to acquire new assets to have its ASX share suspension lifted, hence the merger with Kiwanda.

Last October Phillips River signed a definitive agreement with Kiwanda and Lara to acquire, among other things, a 19.9% interest in the central Colombian coal producer Carbhid SA, with an ongoing option to earn an increasing interest up to 51% in the operating Escalones coal mine and further rights owned and operated by Carbhid in central Colombia.

The deal also gave Phillips River the option to earn a 100% interest in the Pelaya coking coal prospect in northern Colombia.

The coal assets are worth $2.66 million.

The merger between Phillips River and Kiwanda is conditional on Phillips River shareholder approval, raising further capital (up to $A5 million by way of an entitlements issue) and having sufficient shareholders with marketable parcels of shares; and the two companies are seeking further investors and shareholders ahead of the merger by way of the Kiwanda Mines convertible notes.

“This proposal is to introduce Kiwanda and the combined Phillips River/Kiwanda business and to assist with the capital raise and target shareholder spread within Phillips River,” BBY, which was mandated as lead manager for the $5 million raise, said.

“Prospective Investors may consider investing in Kiwanda Convertible Notes and/or underwriting the Phillips River entitlements issue.