The sale of non-core assets by Ora Banda Mining Ltd (ASX:OBM), including Lady Ida tenements earlier in March for $10 million, will net the company $14.2 million ahead of a Final Investment Decision (FID) on the Riverina Underground Project.
Ora Banda is offloading tenements E16/475, E16/484, E16/483, E16/486 to Beacon Minerals Ltd (ASX:BCN) for $2.5 million, with OBM to retain all non-gold/silver mineral rights over the sale tenements.
“As with the previous Lady Ida sale, the sale of these exploration tenements for $2.5 million is an excellent outcome for OBM shareholders as they are non-core and not part of our production target of 100,000 ounces per annum,” Ora Banda’s managing director Luke Creagh said.
The sale requires OBM’s major shareholder Hawke’s Point to release the sale tenements from its existing royalty, however, the company sees no barrier here.
A further $1.7 million will be paid by Hawke’s Point on release of the sale tenements, along with tenements to be sold to Lamerton Pty Ltd and Geoda Pty Ltd from Hawke’s Point’s existing royalty, which won’t come into effect until January 2024.
“The Hawke’s Point funding for $1.7 million is also important for OBM shareholders as it strengthens our balance sheet as well as extending the existing $11 million debt maturity to September 2024 which gives the company improved cash flow flexibility,” Creagh said.
About Beacon sale and Hawke's royalty
OBM entered into binding documentation for Beacon via its wholly-owned subsidiary for $2.5 million, as well as the initial grant of gold and silver rights.
OBM will retain rights to all minerals other than gold and silver in the deal on condition that the tenements will be transferred to the buyer free from the Hawke’s Point royalty.
The company secured debt and royalty funding from Hawke’s Point Holdings LP comprising:
- an unconditional and unsecured loan for $11 million with maturity date of December 31, 2023; and
- a net smelter royalty (NSR) with respect to certain gold products at 0.9% NSR and capped at 900,000 ounces of pure gold produced commencing from December 31, 2023.
OBM is also in a binding agreement with Hawke’s Point to raise further funds and improve its debt profile. The royalty will continue to apply to OBM’s tenements (other than the sale tenements and the tenements to be sold to Lamerton Pty Ltd and Geoda Pty Ltd on the following terms:
- the royalty will increase from 0.9% NSR to 1.0% NSR;
- the cap on the royalty of 900,000 ounces of pure gold will be removed, such that the royalty is uncapped;
- Hawke’s Point will extend the maturity date for the loan for a period of nine months from December 31, 2023, to September 30, 2024, to better align with OBM’s expected revenue window from the Riverina Underground Project; and
- Hawke’s Point will pay $1.7 million cash consideration to OBM for the above.
Shareholder approval is required.