Kainantu Resources Ltd (TSX-V:KRL) (KRL) said it has agreed terms for the acquisition of the remaining 90% interest in the May River Project from Hardrock Limited, a key milestone for the company in gaining full ownership and control of the highly prospective copper-gold project.
Further to its announcement of February 15, 2023, KRL said it has completed negotiations with Hardrock on terms favourable to all parties, which will see the company issue a script consideration of 18 million of its common shares to the vendors representing a value of C$1,440,000, based on the closing market price of KRL shares on March 31, 2023.
In a statement, Matthew Salthouse, CEO of KRL, commented: "We are delighted to announce the full project acquisition, which will result in the 100% ownership of this highly prospective copper-gold asset. Our work to date and historical results from the project have proven the value and confirm the project's potential. We would like to thank the Hardrock vendors for their cooperation during our strategic partnership phase and welcome them as shareholders of the company."
READ: Kainantu Resources announces encouraging initial results from Ontenu Prospect at KRL South
Key Terms of the Agreement:
- On a post-completion basis, the KRL shares being issued to the Hardrock vendores represents an approximate 17.7% interest in the company (or 4.4% for each Hardrock shareholder);
- The shares will be held in equal allotments by the four shareholders of Hardrock, each holding will be independent of each other. No shareholders from Hardrock will become insiders as a result of the transaction;
- The shares are issued subject to a statutory hold period of four months and a day, in accordance with applicable securities law;
- In addition, the shares are subject to a voluntary escrow of 12 months for half the shares and 24 months for the remaining shares;
- The original option agreement between the company and Hardrock has been entirely replaced by the share sale agreement; and
- Closing and issue of the shares is imminent, pending final approval by the Toronto Venture Exchange (TSX-V).
The May River project is highly prospective for gold and copper, laying adjacent to the Frieda River Project, one of the world's largest undeveloped copper mines. Since entering into an agreement with Hardrock in 2021, KRL has acted as manager and conducted further studies at the Mountain Gate and Skiraisa Prospects. These studies have supported the company's view on the high potential of the overall project.
In relation to the acquisition, the company views the price of C$1,440,000 as representing fair value for the remaining 90% interest, which values the project overall at C$1,600,000 million. With the overall size of the tenement package of 890 square kilometres (km2), this equates to a price of C$1,798 per km2.
By comparison, the acquisition of the company's KRL North and KRL South projects in 2020 - as part of the CPC listing onto the TSX-V - implied a price of C$6,347 per km2. This was supported by a review of comparable transactions at this time in PNG. No further comparable transactions have been identified since this time.
Since the CPC listing, the price of copper has appreciated by approximately 16.5%, with current prices of $4.09 per pound. Gold prices have also increased by approximately 7.7%, with current prices of $1,980 per ounce. Given the price increases in both commodities, the company believes the price per km2 is well-supported and reasonable for the acquisition.
May River Copper-Gold Project summary
Located less than 10 kilometres (km) west of Frieda River, the May River asset has several highly prospective targets that KRL aims to explore in short term. The key project prospects - Skiraisa, Foya, Eserebe, Mountain Gate and Iku Hill - are situated along a 7 km long N-NW trending structural corridor, exhibiting many attributes similar to the extended mineralised system identified at the Frieda River Project (between 10 km and 15 km to the east);
Soil, rock chip and channel anomalies indicate the existence of porphyry-style Copper-Gold mineralisation in addition to near-surface structurally controlled and breccia-hosted epithermal gold veins and breccias. Previous drilling at the Skiraisa prospect has demonstrated significant gold potential: 54 metres (m) at 1.83 grams per ton (g/t) gold (Au); 109m at 1.53g/t Au and 96m at 0.89g/t Au. Copper-in-soil anomalies of more than 2.5% (2,500 parts per million) have been reported from several areas at the Mountain Gate prospect;
Kainantu Resources is an Asia-Pacific focussed gold mining company with three highly prospective gold and copper projects - KRL South, KRL North as well as the May River Project. All projects are located in premier mining regions in Papua New Guinea (PNG). It also recently executed an agreement to acquire the Kili Teke project in the western highlands of PNG.
Both KRL North and KRL South show potential to host high-grade epithermal and porphyry mineralization, as seen elsewhere in the high-grade Kainantu Gold District.
The company has a highly experienced board and management team with a proven track record of working together in the region; and an established in-country partner.
Contact the author at jon.hopkins@proactiveinvestors.com