Interra Resources Limited Accelerates Critical Minerals Strategy with A\$500,000 Convertible Note Facility to Morella Corporation

Key Points Investors Must Know

• Interra Resources Limited (“Interra”) has entered into a convertible note facility agreement (“CN Agreement”) with Morella Corporation Limited (“Morella”) for up to A\$500,000 (approx. US\$324,000), providing unsecured convertible notes that can be converted into Morella shares.
• Interra already holds 12.24% of Morella, making it a substantial shareholder. The new agreement enhances its strategic influence and long-term investment in Morella.
• Notes carry an 8% p.a. coupon, payable quarterly in cash. Optionally, interest can be paid in shares at a 15% discount to the 20-day VWAP prior to conversion, subject to Interra’s consent.
• Notes mature in 36 months from first drawdown. Flexible drawdown options: one tranche of A\$500,000 or two tranches of A\$250,000. Repayment by Morella is allowed after 12 months without penalty.
• Conversion rights: Interra can voluntarily convert after 12 months, but cannot exceed 19.99% ownership unless Corporations Act exemptions apply.
• If Morella raises at least A\$3 million in equity before maturity, Morella can require conversion or repayment of the notes at a conversion price set at a 15% discount to the 20-day VWAP.
• In case of default, Interra can convert at a deeper 25% discount to the 20-day VWAP.
• The transaction is classified as a “discloseable transaction” under SGX rules. No shareholder approval is required, but the deal exceeds the 5% threshold for market capitalization impact.
• The financial effects are minimal, but positive:
  • EPS increases slightly (from US\$0.66 cents to US\$0.67 cents).
  • NTA per share remains unchanged at US\$5.67 cents.
• Source of funds: Facility funded via internal resources.
• Strategic rationale: Interra is diversifying into renewables and critical minerals, leveraging Morella’s portfolio in lithium, rubidium, and titanium across Australia and the US.
• Recent Morella developments:
  • Discovery of 12 new lithium exploration targets at the Mallina Lithium Project.
  • Acquisition of the Dixon Well titanium exploration license in Murchison, Western Australia.
• Potential for further stake increase: The convertible notes allow Interra to increase its Morella stake, subject to regulatory limits.
• Director interests: Executive Chairman Mr Ng Soon Kai directly and indirectly holds a total of 4.71% in Morella.

What Shareholders Should Watch For (Price-Sensitive Factors)

• This transaction positions Interra as a key investor in Morella’s critical minerals expansion, which could be significant in the context of global clean energy transition trends.
• If Interra exercises its conversion rights and regulatory thresholds are met, its Morella holding could approach the 20% mark, increasing its strategic influence and possibly affecting share price dynamics in both companies.
• Morella’s recent exploration successes in lithium and its entry into titanium could provide upside for both Morella and Interra, especially given the convertible note’s conversion discount feature.
• The transaction signals Interra’s continued shift toward renewables and critical minerals, beyond its traditional petroleum exploration and production business.
• Investors should monitor future Morella equity raisings — if Morella raises A\$3 million or more, mandatory note conversion or repayment could accelerate Interra’s equity exposure.
• The coupon interest and conversion discount mechanics may provide downside protection and upside opportunity for Interra, depending on Morella’s share performance.

Full Transaction Details

• Facility Amount & Structure: Up to A\$500,000 in unsecured convertible notes, face value A\$50,000 each.
• Maturity: 36 months from first drawdown. Flexible drawdown window.
• Interest: 8% per annum, paid quarterly in cash. Option for share payment requires Interra’s consent, at a 15% discount to VWAP.
• Conversion Rights: Voluntary conversion after 12 months; subject to regulatory cap at 19.99% stake unless exemptions are met. Conversion price set at a 15% discount to 20-day VWAP.
• Default Event: Interra can convert at a 25% discount to VWAP if default persists for 15 days.
• Redemption: Morella may redeem after 12 months by giving 20 days’ notice, at face value plus accrued interest.
• Mandatory Conversion: If Morella raises A\$3 million or more in equity before maturity, it can require conversion or repayment of notes.
• Governing Law: Western Australia.

Financial Impact

• Pro forma figures show a modest EPS uplift and stable NTA per share.
• Relative impact by SGX Rule 1006:
  • Net asset value impact: 0.68%
  • Net profit impact: 1.47%
  • Market capitalization impact: 7.18% (discloseable transaction, no shareholder vote required)
• Estimated transaction expenses: US\$5,000

Strategic Context

Interra’s move reflects its ongoing diversification into renewable energy and critical minerals. The company is actively pursuing new ventures, including floating solar farms in Indonesia and silica sand concessions, in addition to its traditional oil & gas portfolio. Morella’s focus on lithium, rubidium, and titanium — key materials for clean energy and high-value industrial applications — aligns with Interra’s new strategic direction.

Conclusion

This transaction marks a strategic expansion for Interra Resources, potentially increasing its stake and influence in a high-growth sector. For investors, the combination of a secured coupon, conversion discounts, and exposure to Morella’s critical minerals portfolio may offer both defensive and offensive investment opportunities. The deal signals Interra’s intent to be a player in the energy transition and critical minerals supply chain, which could have material implications for its share value.

Disclaimer:

This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult with professional advisors before making any investment decisions. The information herein is based on publicly available documents and may be subject to change.

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