Aftermath Silver (TSX-V:AAG) Ltd said it has entered a non-binding term sheet to sell its 100% interest in the Cachinal De La Sierra Silver-Gold Project in Chile's Antofagasta region to Honey Badger Silver Inc.
Aftermath Silver (TSX-V:AAG) and Honey Badger are working to finalize a definitive agreement on or before an exclusivity period that ends on August 15, 2022. While the term sheet is non-binding, the parties have agreed to a mutual break fee of C$250,000 if a definitive agreement is not reached by the requisite date due to a party's action or inaction.
"Our priority is to advance the Berenguela silver-copper-manganese project in Peru, and the sale of Cachinal - which became non-core for us as our work at Berenguela progressed - represents the fastest way to potentially unlock value in the project for our shareholders,” Ralph Rushton, President of Aftermath Silver said in a statement.
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“In addition to cash and share payments, we will receive production payments when commercial production starts and we will also retain an NSR (Net Smelter Return)," he added.
According to the term sheet, payment will be through C$1,000,000 in shares of Honey Badger payable at closing, priced at either the volume-weighted average share price on the Toronto Venture Exchange (TSXV) for a period of thirty trading days immediately preceding the date of announcement of the transaction or the maximum discounted price allowed under the policies of the TSXV, whichever is greater.
The term sheet includes cash payments, namely C$400,000 payable at closing, C$452,000 six months after closing, C$400,000 on May 21, 2023, and C$400,000 eighteen months after closing.
Additionally, Honey Badger shall grant a 1% Net Smelter Return Royalty with a complete buyback option at Honey Badger's sole discretion for a purchase price of C$8,500,000.
The term sheet also includes production payments. When commercial production starts, Honey Badger shall pay in cash or shares at Aftermath's option, C$0.50 per payable silver ounce produced at the Cachinal Project, capped at C$2,000,000 in payments.
Contact the author at jon.hopkins@proactiveinvestors.com