Gold producer Ora Banda Mining on Monday announced a farm-in agreement with a subsidiary of Wesfarmers to sell a large portion of its mineral rights, other than gold, on the Davyhurst tenement package in a A$45-million deal.
The announcement sent Ora Banda’s stock surging 19% to close at A$0.16 a share, just shy of its 52-week high of A$0.17 a share.
In terms of the agreement, Wesfarmers subsidiary Brenahan Exploration (BEPL) will buy 65% of the mineral rights, excluding gold and byproducts, for A$26-million in cash and a 2% royalty.
Ora Banda and BEPL will also form a 65:35 joint venture with BEPL having the option to increase that to 80:20 by sole funding an additional A$15-million in exploration expenditure over the next three years.
Ora Banda is free carried from any discovery to completion of a definitive feasibility study (DFS) over the area applicable to that DFS.
“The Davyhurst tenement package is very large and has never had any sustained or modern exploration programmes given its disjointed and under-capitalised historical ownership. Although we have had encouraging early stage lithium results, Ora Banda is a gold-focused company and given the underexplored nature and size of this belt, we expect it would take many years to do it justice for other minerals,” said MD Luke Creagh.
Essentially, Ora Banda views this as a A$45-million deal with A$30-million in cash and A$15-million in exploration, he added. “The deal structure is aligned to maximise the potential of multiple discoveries to the benefit of both parties, while providing balance sheet strength to Ora Banda to further grow gold production,” Creagh added.
To raise further capital, Ora Banda has agreed to effectively on-sell 1.5% of the 2% royalty to be received from BEPL to Hawke’s Point for A$4-million.