PERTH (miningweekly.com) – Gold developer Orinoco Gold has inked a binding agreement with its minority partners in the Cascavel gold mine, in Brazil, to acquire the outstanding 30% interest in the project.
The transaction would result in Orinoco consolidating the ownership of the mine, simplifying and streamlining the ownership structure.
Under the terms of the agreement, Orinoco will pay an up-front deposit of $300 000 cash as well as $300 000 in shares to its minority partners. These shares will be issued based on the ten-day volume weighted average share price of Orinoco shares.
Further staged retention payments will also be made, including $1.5-million in cash and $1.35-million in share on September 1, 2017, and a similar amount in cash and shared on September 1, 2018.
Furthermore, a royalty of 1.5% will be payable on production from the Cascavel mine, starting after the first payment.
By March 2019, Orinoco could elect to purchase the royalty for $6-million, which can be made through a combination of cash or shares, or pay an increased total royalty of 3% on production, starting on March 1, 2019, or make a payment of $3-million to keep the royalty at 1.5%. This payment can also be made through a combination of cash and shares.
In addition, as part of the consideration, Orinoco will aslo forgive a total of $2.1-million of accrued debts repayable by the minority partners to Orinoco out of future profits from the project vehicle.
Orinoco MD Mark Papendieck said on Thursday that the acquisition would deliver a number of financial and strategic significant benefits to the company.
“This is a positive step for us, giving Orinoco immediate access to 100% of the free cash flow from Cascavel when it resumes production later this year. The agreement is structured in a way which minimizes the up-front cash payable and allows us to stage the remaining payments over two years as production and cash flow ramps up, with the balance of the consideration payable via a production royalty which Orinoco has the option to purchase.”
Meanwhile, Papendieck has resigned as MD from Orinoco, but will work with the company to ensure a smooth transition to his successor.
Papendieck said he believed now was the logical time to hand over the leadership of the company from both a personal and professional perspective.
“With the new mine development now under way and ownership of the Cascavel now consolidated, it makes sense to hand the reins over to someone that can lead Orinoco into the next phase of the company’s future.”
Meanwhile, Helcio Guerra and Terry Topping have joined the Orinoco board, while chairperson John Hannaford has announced his intention to retire at the end of May to concentrate on his other business interest.
Independent non-executive director Brian Thomas will assume the role of chairperson.