Hillgrove Resources Ltd (ASX:HGO) has entered into a royalty agreement with Freepoint Metals and Concentrates LLC in relation to its 100% owned Kanmantoo copper gold project located in South Australia.
Hillgrove will receive cash payment of $6 million for the Kanmantoo royalty, while Freepoint will receive 2.5% of net smelter returns for the first 85,000 tonnes of payable copper, reducing to 0.5% thereafter.
Royalty payments will only occur from future production.
“Freepoint is a long-standing partner and supporter of our company, both as a significant shareholder, and as our offtake partner. We are very pleased to continue this partnership with Freepoint through the royalty agreement, which, given the royalty is based on future production from Kanmantoo, demonstrates their strong commitment to the development of the Kanmantoo underground project and appreciation of the on-lease exploration upside,” Hillgrove CEO and managing director Lachlan Wallace said.
“The agreement highlights the robustness of the Kanmantoo Underground project, as demonstrated in the economic assessment, with subsequent updates to the Kavanagh and Nugent mineral resource estimates expected to increase mine life.
“Moreover, both Nugent and Kavanagh remain open at depth and along strike, and are only two of nine mineral systems that have either been drilled or partially mined within the permitted lease, representing an excellent opportunity to expand the mine life with further drilling. The consideration for the royalty immediately boosts our cash position without shareholder dilution, enabling the company to consider a range of restart and resource expansion options, particularly in light of recent changes in the global copper market.”
Agreement details
The key terms of the agreement include:
- Hillgrove to receive consideration of $6 million at completion;
- completion is subject to satisfaction or waiver of conditions precedent by August 31 2022;
- consideration to be used exclusively for capital expenditures and to fund working capital for completing underground development, plant refurbishment and restarting and commissioning the Kanmantoo Underground Project;
- freepoint to receive 2.5% of net smelter returns for the first 85,000 tonnes of payable copper at the Kanmantoo project, reducing to 0.5% thereafter; and
- royalty will not be payable on garnet as well as any processing or reprocessing of historical tailings.
Outstanding conditions precedent include no material adverse events and registration of the caveat with the Department of Energy and Mining.
“Freepoint and Hillgrove’s close relationship have been fostered over a long period of time, which included financing the Kanmantoo technical studies in the early days,” Freepoint senior managing director Philip Bacon said.
“Since the completion of the open pit operations in 2020, the Hillgrove team have done a remarkable job in growing the Kanmantoo Underground Mineral Resource Estimate. Freepoint looks forward to the restart of operations at Kanmantoo and continuing our long-term partnership with Hillgrove.”