South Star Battery Metals Corp. (TSX-V:STS, OTCQB:STSBF) said it has closed the Phase 1 deposit transaction under its previously announced metals purchase and sale agreement with Sprott Private Resource Streaming and Royalty Corp.
With the closing of the recent private placements and receipt of the Phase 1 Deposit to fund capex under the agreement, the company said it believes it is fully funded for construction of the Phase 1 plant and mine at its Santa Cruz Graphite mine in Bahia, Brazil.
The agreement includes a total cash consideration of up to US$28 million as prepayment for graphite concentrates from the Santa Cruz Project. South Star will act as the sales agent for Sprott for the percentage of production in favour of Sprott and subject to the agreement.
READ: South Star Battery Metals completes second tranche of private placement raising $2,326,700
In a statement, Richard Pearce, South Star CEO said: "We have successfully partnered with strong, long-term institutional investors familiar with Brazil, mineral resources and the battery metals sector.
“We are fully funded for Phase 1 construction with commissioning and commercial production planned for the end of 2023. We have successfully completed very flexible financing while minimizing shareholder dilution and at a very reasonable cost of capital.
“We expect to deliver on our promise and commitment to be the first new graphite producer since 1996. Thanks to the Sprott team for laying the foundation for a bright future and an exciting 2023."
Stream agreement highlights
The Phase 1 deposit of US$10 million is expected to fund 100% of the required Phase 1 capex, with commercial production scheduled for Q4 of 2023.
The Phase 1 Deposit will also be used to repay the outstanding principal and interest under the previously announced US$2 million loan from Sprott.
The Phase 2 deposit - a minimum of US$9 million and maximum of US$18 million cash consideration for the partial funding of Phase 2 capex (US$27 million), is subject to Phase 2 due diligence by Sprott, as well as investment committee update and approval and customary conditions precedent.
South Star issued 1.2 million warrants to Sprott in connection with the closing of the Phase 1 deposit (being the 6 million previously announced warrants, on a post-consolidation basis). Each whole warrant entitles Sprott to purchase one additional common share of the company at an exercise price of C$0.72 for a period of three years from the closing date of the Phase 1 Deposit, subject to acceleration in certain circumstances.
South Star Battery Metals is a Canadian battery metals project developer focused on the selective acquisition and development of near-term production projects in the Americas.
South Star's Santa Cruz Graphite Project, located in Southern Bahia, Brazil is the first of a series of industrial and battery metals projects that will be put into production.
South Star's next project in the development pipeline is a project in Alabama located in the middle of a developing electric vehicle, aerospace and defence hub in the southeastern US
Contact the author at jon.hopkins@proactiveinvestors.com