Theta Gold Mines Ltd (ASX:TGM) will be advanced US$70 million (~A$110 million) cash in return for a gold stream on Theta’s TGME Gold Project in South Africa after it entered into a non-binding Streaming Term Sheet with Sprott Resource Streaming and Royalty Corporation.
Theta sees the agreement as a major milestone on the path to achieving its initial 1.24-million-ounce Life of Mine strategy of first gold production at the TGME Gold Project.
For Sprott, the project is expected to deliver up to 100,000 ounces of gold over its Life-of-Mine (LOM): Sprott will pay 10% of the gold price per ounce delivered under the stream.
The TGME Stream covers 90% of the TGME Gold Project’s first stage of US$77 million peak funding requirement.
This funding gives the Theta board confidence to deliver its growth strategy to achieve a 160,000 ounces per annum production profile within five years with the potential to expand the mineral resource and incorporate up to 40 other mines near to the plant site.
The stream funding is conditional on completion of due diligence, final definitive documentation, cost to complete certificate and South African regulatory approvals.
The TGME Stream enables Theta to gain full exposure to future gold price movements as it does not require Theta to set up minimum hedging positions.
More details
Theta has the option to buy-back 50% of the stream based on a pre-agreed price, following which Theta will deliver 2% of the ongoing gold production.
Prior to initial gold delivery, Theta will pay in cash or scrip (at 10% discount to 5 days volume-weighted-average-price on a semi-annual basis, 9.5% per annum interest to Sprott for the funds advanced.
Closing is scheduled by the first quarter of 2023 and the funds will be applied towards the construction of the TGME Gold Project, in the Eastern Transvaal Goldfields in the Mpumalanga Province, South Africa.
Due diligence will start immediately and once satisfied a Binding Gold Stream Agreement between Sprott and Theta Gold will be finalised, executed and announced to the market in detail.
Significant milestone
“We are very pleased to announce this significant milestone in our project financing efforts for the construction of the TGME Gold Project,” Theta's executive chairman Bill Guy said.
“Sprott Streaming & Royalty is an experienced and well-regarded project finance partner to the mining industry. Its parent Sprott Inc. is a New York Stock Exchange (NYSE) and Toronto Stock Exchange dual-listed group, and we are excited to be working with Sprott to redevelop South Africa’s very first gold field.
“The streaming deal is a much more cashflow friendly style of financing compared to a straight debt finance. It is less risky to a start-up project where the unique repayment mechanism provides the company the flexibility to manage its cashflow as long as the minimum gold delivery requirements are met.
“Once the Sprott funding is closed, the company may commit to further upgrading our ore reserve base, as well as to potentially further expand our total mineral resource in order to increase production scale and life of mine from the existing stage one definitive feasibility study mine schedule, hence creating ongoing significant value growth for our shareholders.
“The company recently published a definitive feasibility study 2 for the project demonstrating robust economics for a horizontal stope underground mining and milling operation with low initial capital cost and high rate of return.
"An Environmental Impact Assessment (EIS) is ongoing with the local authorities and is expected to be completed later this year, along with the final approvals for two Water Use Licenses (WUL) under application.”