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Karora Resources strikes deal to sell 28% interest in Quebec nickel project as it focuses efforts on gold

Published: 13:45 22 Jul 2020 BST

Karora Resources Inc. -
Karora will have the right to receive a portion of future proceeds of any future sale of Dumont or other monetization event

Karora Resources Inc (TSE:KRR), formerly known as RNC Minerals Corp (TSE:RNX), has announced a deal to sell its 28% interest in the Dumont project in Quebec, one of the globe's largest undeveloped nickel assets, as the group concentrates on becoming a profitable, mid-tier gold miner.

Dumont has been sold to two private funds advised by Waterton Global Resource Management for a total consideration of up to C$48 million, the firm said. Karora will have the right to receive a portion of future proceeds of any future sale of Dumont or other monetization event.

READ: Karora Resources reports another robust quarter of output as it reduces costs amid rising gold price

"The structure of the deal provides immediate cash to Karora of $10.7 million to further invest in increasing our gold production, cost reduction initiatives and aggressively explore our numerous high-quality exploration targets at our Beta Hunt and Higginsville operations," Paul Andre Huet, CEO at Karora said in a statement.

"It also allows our shareholders to participate in the upside potential of Dumont and any surge in nickel prices through an additional payment based on any future sale or monetization of Dumont by Waterton of up to $40.2 million subject to the terms and conditions of the sale agreement," he added.

At closing, Karora will receive C$10.7 million, consisting of $7.4 million from Waterton for its interest and a C$3.3 million refund of Karora's share of the cash held within the Dumont joint venture.

Waterton will become the operator and manager of the Dumont project upon closing of the deal, which is expected before the end of July.

"Dumont has been the foundational asset during this company's early focus on nickel and it is very important to Karora that its shareholders retain exposure to the future value of such a robust development asset," Huet said.

"This transaction will also simplify the Dumont management structure moving forward with a focus on maximizing the value of the project under Waterton's management," the Karora boss added.

On closing, the two private funds will own 100% of Magneto Investments (Magneto). Since Magneto was founded in 2017, the Dumont project and all associated assets been held 100% by Magneto and managed by Karora's team of nickel experts.

The Dumont management team will fully transition to Magneto to ensure the continuity of technical expertise and stakeholder relations on the project.

Dumont is expected to produce an average of 39,000 tonnes of nickel per year over 30 years at all in costs of US$3.80 a pound.

Contact the author at giles@proactiveinvestors.com

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