East African gold producer Caracal Gold has announced that the prepaid gold purchase agreement announced in November last year with privately held group of companies OCIM Metals and Mining SA will not be proceeding.

On November 29, Caracal’s Kenyan subsidiary Kilimapesa Gold announced that it had secured $10.5-million of financing through a prepaid gold purchase agreement with OCIM.

The total contract price of $10.5-million would have been made available to Kilimapesa, subject to conditions, in two tranches, with the first $7-million being available for drawdown on or before December 31 last year and a second tranche of $3.5-million to be drawn down on terms to be agreed between the parties at a later date.

The proceeds from this financing would have enabled Caracal to be fully funded and to continue with the expansion of production at the Kilimapesa gold mine, in Kenya, to the targeted rate of 24 000 oz/y, which was expected by March.

The funds raised would also have been used to complete a Phase 2 exploration programme on Caracal’s Nyakafuru project, in Tanzania, to ultimately advance a preliminary economic assessment on the project.

The reason for the cancellation of the agreement is that the long stop date of December 31 has passed and, as there is an unfulfilled condition precedent that would have provided OCIM security over the mining licence for the Kilimapesa gold mine, OCIM has not extended the long stop date.

“We are disappointed with the OCIM decision not to continue on the final condition precedent and close the transaction. The Caracal team worked tirelessly from May 2022 and the company and projects passed detailed legal, financial and technical due diligence,” Caracal CEO Robbie McCrae said.

He added that the robust fundamentals of the Kilimapesa expansion project remained unchanged, with the operations and project team in place and support from all stakeholders in Kenya and Tanzania remaining strong.

He said the lessons learned from the process with OCIM have been constructive.

"With funding secured from [private trading company] Philoro Global Trading and other proposals received for similar non-dilutive financing, we will move quickly to replace the OCIM funds,” McCrae said.