London-listed Arc Minerals has entered into a binding agreement to sell its 99.43% interest in Casa Mining to Golden Square Equity Partners for up to $50-million.
Golden Square will assume all existing liabilities pertaining to Casa, which were £1.95-million, or about $2.3-million, as at the end of September last year.
An amount of $5-million will be paid to Arc on Thursday, in the form of a loan note that will mature on March 19, 2021.
In the event that the share capital of Casa is acquired by a publicly traded company, Golden Square may discharge the $5-million liability by delivering shares of the public company with a market value of $5-million to Arc.
The balance of $45-million is payable in royalties, based on potential gold production at the projects and interests that are held by Casa.
The payment of the royalty will depend on Casa becoming a gold producer and this will, in turn, depend on Casa raising significant additional funding, successfully completing certain studies and obtaining required permits.
Arc warned on Wednesday that there was no guarantee that any royalty payments would flow to it or on the timing of such payments.
Casa currently owns a near 74% stake in the Akyanga gold project, in the Democratic Republic of Congo, which has a three-million-ounce inferred resource.
Arc will apply the net proceeds of the disposal to exploration and development activities at its projects in Zambia and for general working capital purposes.
“Following the disposal of our interests in Slovakia and Eritrea, the sale of Casa turns Arc into a pure-play copper company with our exciting Zambian copper development where we intend to recommence our drilling programme in the second quarter.
“Given the extremely challenging market conditions we are experiencing with Covid-19, this transaction is attractive to Arc with a potential $5-million cash payment upon the maturity of the loan note in March 2021 and a potential royalty of up to $45-million going forward, allowing us to share some of the future upside at Casa,” commented Arc chairperson Nick von Schirnding.