Mutiny Gold shores up new project funding
THE BOURSE WHISPERER: Mutiny Gold (ASX: MYG) has struck a financing agreement with Canadian Institution, Sandstorm Gold (TSX: SSL) for $41 million (US$43 million), which the company indicated is pivotal to meeting the $102 million financing requirements needed to bring its Deflector gold-copper project in the Murchison region of Western Australia into production by Q4 2013.
Mutiny Gold tenement location. Source: Company
The agreement is for a US$43 million Metals Purchase Agreement with Sandstorm Gold comprising US$38 million in upfront payments, US$5 million in equity and a possible additional US$4 million in performance based payments.
The latter is intended as supplemental finance for plant expansion in year 3 of mining at the Deflector project.
Sandstorm has agreed to purchase an amount equal to 15 per cent of the gold produced from Deflector.
Sandstorm will make an initial upfront cash payment to Mutiny of US$9 million and will make a future cash remittance of US$29 million once Mutiny has received final mine permits for Deflector as well as completed certain funding conditions.
In addition, Sandstorm will make ongoing per ounce payments equal to the lesser of US$500 per ounce of gold and the prevailing market price of gold.
If Deflector produces more than 85,000 ounces of gold in a given year, Sandstorm will make a one-time US$4 million payment to Mutiny.
“As the first Australian company to negotiate a transaction of this type with Sandstorm, which we believe in itself is a strong endorsement of Deflector and our broader strategy, Mutiny has broken new ground in this innovative form of project funding,” Mutiny Gold managing director John Greeve said in the company’s announcement to the Australian Securities Exchange..
“Working in conjunction with our advisors Noah’s Rule we have been able to negotiate the Metals Purchase Agreement in a way that has made it highly complementary to traditional project finance, rather than as an alternative, as it is often seen.
“The process has not been without its challenges and has taken longer than we expected but we hope existing shareholders will be delighted with the outcome in terms of the equity dilution avoided.”
Mutiny highlighted what it considers to be an important feature of the MPA being its right, but not obligation, for a period of 36 months from the date of the Second Deposit, to repurchase in whole or in part, up to 50 per cent of the Gold Stream by making a payment equal to the greater of US$24.7 million or the value of 14,742 gold ounces, whereupon the percentage of gold that Sandstorm is entitled to purchase shall be decreased from 15 per cent to 7.5 per cent.
“This is a very positive move for Mutiny, as we have now created the platform which encompasses the majority of the funding requirements for Deflector,” Greeve said.
“This is completely in line with our stated objective to minimise overly dilutive equity issues while progressing Deflector.
“Our next steps will see us continue to resolve the outstanding administrative matters required for final funding of both the Metals Purchase Agreement with Sandstorm and the Bank Project Financing, as we move to production.
“We have also discussed ongoing collaborative development funding arrangements with Sandstorm which could cover our future expansion plans.
“There is the potential for a high degree of mutual interest between Sandstorm and Mutiny in supporting our strategy of bringing online a pipeline of gold and copper mines.
“This is not limited to Deflector and may include future asset acquisitions.”