Azarga Metals Corp (CVE:AZR) is set to receive as much as US$3.5 million in investment from an international natural resources investment management firm for the possible restart of its Unkur copper-silver project in Russia this summer.
The Canada-based resource group has struck binding terms with Baker Steel Capital Managers LLP, acting on behalf of its discretionary client funds, mainly Baker Steel Resources Trust Ltd. The deal sets the investment at least US$3 million and up to US$3.5 million in three tranches through a convertible loan.
READ: Azarga Metals upbeat about future after long-awaited Unkur PEA already shows robust project
The loan bears an 8% interest rate and conversion price of C$0.14 a share.
As part of the transaction, Azarga will issue US$1.7 million to US$2 million in common stock warrants with an exercise price of C$0.17 each. If fully exercised, the warrants would increase BSCM clients' interest in Azarga to an overall investment of up to US$5.5 million.
"I'm excited our strategic process has resulted in a partnership with such a high-quality, resources-experienced investor," Alex Molyneux, chairman of Azarga, said in a statement. "Baker Steel Capital Managers, the manager of BSRT, has been around for 18-years, with a great reputation for picking early-stage winners in the minerals space."
The transaction is subject to conditions, including due diligence and approval of Azarga's board of directors.
The convertible loan will be available in tranches: US$1 million on completion and US$2 million between four and six months following the first tranche. A third tranche of up to US$0.5 million will be drawable between four and 12 months, following the second tranche, if the overall final investment size is more than US$3 million.
Successful exploration
Azarga Metals acquired Unkur in eastern Russia, near the China-Russia border, in mid-2016 and then embarked on an initial exploration program.
A preliminary economic assessment filed in August of last year was positive, envisaging an eight-year mine life producing 13,200 tonnes of copper and 3.7 million ounces of silver per year and resulting in an estimated pre-tax net present value of US$206.3 million (post-tax US$147.5 million) and an internal rate of return (IRR) of 28.9%.
Azarga reckons there is potential to at least double the size of the existing resource with a second-phase drilling program.
Contact Giles at giles@proactiveinvestors.com