Precious metals royalty and streamlining company Gold Royalty has announced it will provide $31-million in project financing to Canadian miner Aura Minerals for the Borborema gold project, in Brazil.
The agreement between the companies comprises Gold Royalty acquiring a 2% net smelter return (NSR) royalty on the project for a cash consideration of $21-million and providing additional financing as lender under a royalty-convertible gold-linked loan valued at $10-million.
Gold Royalty has already received commitments from Queen’s Road Capital Investment (QRC) and Taurus Mining Royalty Fund to complete a private placement of $40-million of unsecured convertible debentures.
Gold Royalty CEO and chairperson David Garofalo comments the company is pleased to have secured a royalty over the Borborema gold project, and partner with Aura in creating a mutually beneficial structure.
“The Aura team has a proven track record of building mines in Brazil and we look forward to their team advancing the construction of the Borborema project and bringing the asset into production,” he adds.
Garofalo is also pleased to have the support of QRC and Taurus as part of this transaction.
“Both of these institutional investors are leading financiers to the global resources sector, and their strategic investment further validates the value-accretive transactions we are executing at Gold Royalty as part of our long-stated growth strategy,” he explains.
Together with a $100-million term loan previously entered into with Banco Santander Brazil and $14-million raised through gold collars with several financial institutions, Aura has now secured more than $145-million towards construction of the Borborema project, which has an estimated total construction capital expenditure of $188-million.
DETAILED TERMS
The Borborema investment is structured to provide immediate cash flows through pre-production payments under the royalty and gold-based payments under the gold-linked loan expected to contribute a combined 1 440 gold equivalent ounces a year to Gold Royalty, with growing cash flow coming from the 2% NSR royalty once the Borborema project enters production.
Aura anticipates construction to be complete early in 2025, with commercial production earmarked for the third quarter of that year.
Gold Royalty has retained the option to convert the gold-linked loan into an incremental 0.5% NSR royalty upon maturity to benefit from potential exploration success and expansion at the Borborema project.
The $40-million unsecured convertible debenture financing adds long-term strategic partners to support the continued accretive growth of the company, with proceeds expected to be used to fund the Borborema investment and reduce the amount outstanding under the company's existing secured revolving credit facility.
The Borborema project is located in the Seridó region, Rio Grande do Norte State, northeast Brazil. It consists of three mining concessions covering a total area of 29 km2.
Aura completed a feasibility study on the project in August, which outlined the project as an openpit gold mine with a 748 000 oz/y production capability over an initial 11-year mine life, with additional production upside.