Mineral & Financial Investments Ltd (AIM:MAFL)(MAFL) has issued an investment update on a financing package for the Lagoa Salgada Project in Portugal.
The project is held jointly by MAFL's wholly owned subsidiary Mineral and Financial Investments AG (MF&I), Redcorp Empreedimentos Mineiros Lda and Ascendant Resources Inc, who are also operating the project.
MAFL noted that Ascendant has entered into a US$15mln metals stream agreement with Sprott Private Resource Streaming and Royalty (B) Corp for the benefit of the Lagoa Salgada Project. This obligation is undertaken by Ascendant, with M&FI and Redcorp a party to the stream agreement only insofar as to give effect of the undertaking by Ascendant.
In a statement, Jacques Vaillancourt, MAFL president & CEO said: "We are thrilled to see our partner - Ascendant, partnering with the very experienced team at Sprott Streaming and Royalty to fully finance the feasibility study at Lagoa Salgada. We believe Ascendant has made tremendous progress throughout its technical work and studies for the Feasibility Study at Lagoa Salgada which leads us to expect to see a very robust outcome. This should allow Ascendant to further advance the development of the project to a construction decision."
He added: "A construction decision is expected to follow closely behind the completion of the Feasibility Study. Importantly for M&FI, this will allow Ascendant to fulfil one of its obligations under the earn-in Agreement, that of paying M&FI US$2.5mln on or before December 22, 2023. Additionally, we have negotiated and agreed a sale option agreement with Ascendant. Whilst we continue to explore and consider all opportunities for our interest in the project, nevertheless, this option provides M&FI the ability of monetizing our remaining interest at a value linked to the project Net Present Value (NPV) in the upcoming Feasibility Study".
Ascendant has said it intends to use the proceeds from the stream agreement to complete the ongoing NI43-101 compliant feasibility study for the Lagoa Salgada Project, advance permitting activities, and for Ascendant's general corporate and working capital purposes, which includes the fulfillment of the earn-in.
The stream agreement provides for the sale and delivery to Sprott of 1.75% of all metals produced from the Lagoa Salgada Project at a rate of 15% of the market price for gold until the delivery of 45,000 gold equivalent ounces. At which point, the rate will be increased to 75% of the market price. Ascendant also can buy down up to 50% of the stream on or before two years following the date of commencement of commercial production at the Lagoa Salgada Project (as further set out in the stream agreement) for up to US$10.5 million.
To facilitate funding in advance of commercial production, an affiliate of Sprott has also issued a US$15mln secured note to Ascendant, which bears interest at a rate of 10% per annum, calculated and payable quarterly and which M&FI understands will mature on the earlier of: i) the achievement of commercial production at the Lagoa Salgada Project together with certain other conditions; and ii) November 25 , 2031.
Ascendant has also provided Sprott a first right of approval to participate in any future stream or royalty-type financing until certain delivery thresholds are met.
Variation to Shareholders Agreement
As part of this arrangement, M&FI and Ascendant have also amended the terms of the shareholders agreement made between the three parties in the Lagoa Salgada Project, to provide the following:
(a) That Ascendant shall not transfer, in whole or in part, any of its rights or obligations under the secured note or the stream agreement to Redcorp without the written consent of M&FI; and
(b) M&FI shall have the right and option, but not the obligation, to exercise an option within 6 months (plus 10 business days) of the Stage Two Option Exercise Date (being the date when Ascendant has earned 80% of Redcorp and being no later than June 22, 2023) to require Ascendant to purchase all, but not less than all, of the shares in Redcorp at a defined price.
(c) The price would be an amount in US dollars, payable in cash, equal to 5% of the post-tax net present value of the Lagoa Salgada Project provided in the feasibility study completed prior to the date of exercise using a 10.5% discount rate.
It is possible that the exercise of the Put Option could trigger Rule 15 of the AIM Rule for Companies. This would require the exercise to be conditional on the consent of its shareholders being given in a general meeting, as well as a shareholder circular and an announcement. Further updates will be provided in due course if the Put Option is exercised.