Metalla Royalty & Streaming Ltd (TSX-V:MTA) is set to buy, from an arm's length seller, an existing 5% net smelter return royalty (NSR) on the South Domes portion of the Castle Mountain gold mine in California - soon to be one of the USA's largest gold mines.
The asset is owned by Equinox Gold (TSX:EQX) Corp and the total consideration is US$15 million in cash.
"The Castle Mountain royalty provides Metalla shareholders with exceptional long-term exposure to a significant property operated by one of the industry's premier operators," said Brett Heath, CEO of Metalla.
"The 5% NSR covers the South Domes portion of the producing Castle Mountain Gold Mine, soon to be one of the USA's largest gold mines when the phase 2 expansion is implemented. Metalla shareholders will gain a meaningful 5% NSR on reserves and resources of nearly 2 million ounces of gold on a mine expected to produce in excess of 200 Koz annually."
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Phase 1 at Castle Mountain is currently operating at the JSLA, Jumbo and Oro Belle pits with expected output of between 30,000 and 40,000 ounces of gold annually.
Phase 2, which is expected to begin in 2026 and includes South Domes, is projected to expand production to more than 200,000 ounces of gold annually.
Castle Mountain is poised to become one of the USA's largest gold mines with an expected annual output of 218,000 ounces and total all-in sustaining cost of US$858/oz over the 14-year Phase 2 mine plan.
The project currently boasts 4.2 million ounces (Moz) of gold reserves, of which South Domes covers 1.1Moz gold reserves. Equinox has outlined the potential to expand the 2021 feasibility mineral reserve pits to ultimately connect the JSLA and South Domes pits.
Metalla will make an upfront payment of US$10 million in cash at closing, with the remaining US$5 million to be paid within 20 months from the closing date bearing interest at a rate of 4% per annum. Closing of the transaction is subject to customary closing conditions.
Also in the statement, the company said it will drawdown an additional C$3 million under its existing amended and restated convertible loan facility with Beedie Capital.
This will increase the total amount drawn under the convertible loan facility to C$8 million with an additional C$12 million remaining available to the firm.
It also updated on its previously announced at-the-market equity program. As of September 13, 2021, Metalla has sold 1,287,701 shares under the program for gross proceeds of US$11.4 million. As a result, it is fully funded to make the $10 million closing payment for the royalty acquisition on Castle Mountain, it said.
Contact the author at giles@proactiveinvestors.com