LONDON (Alliance News) - Metminco Ltd Wednesday said it is expecting to formally acquire the company that owns the Quinchia gold project in Colombia by the end of May as the company continues on its path to becoming a gold producer.
Metminco struck a deal earlier this year to acquire the owner of the gold project, Minera Seafield SAS, from RMB Australia Holdings Ltd, as it looks to snap up and develop the asset into production.
RMB Australia Holdings, however, had to acquire the remaining stake in Minera Seafield that it did not already own before it could sell the company to Metminco.
Metminco said Wednesday that RMB Australia has now informed the company that it is the sole owner of Minera Seafield, paving the way for the deal to progress.
That has now made the deal binding, and as per the terms of the agreement, Metminco has issued 50.0 million shares in the company to RMB at a price of 0.5 Australian cents each.
Metminco said it expects to complete the acquisition before the end of May.
On completion of the deal, Metminco will issue RMB with another 350.0 million shares at the same issue price, and pay around AUD500,000 to RMB for the costs of maintaining the operation whilst the deal is being finalised.
A year after the deal has been completed, Metminco will then pay RMB AUD1.0 million in cash and another AUD1.0 million two years after the deal has been completed. A third payment of AUD3.0 million would be due after 36 months. A fourth payment of AUD2.0 million would be made 48 months after the deal is completed.
Those last two payments would be made earlier if Metminco makes a decision to mine the operation.
Metminco said it also would pay a maximum of AUD7.0 million in royalty payments to RMB from operating cashflows.
Overall, Metminco will be paying up to a total of AUD7.0 million in cash for the deal, in addition to the initial AUD500,000 and the AUD7.0 million in potential royalty payments, plus the 400.0 million shares.
Those 400.0 million shares would represent around 11.8% of the company's enlarged issued share capital.
Metminco said its focus would be on the new asset when it originally struck the deal, despite recently stating its Los Catalos mine remained a "valuable asset" which has the potential to be an "important future copper producer".
The switch in focus to gold from copper will no doubt of been partly driven by the resilience in gold prices in the current downturn in the wider commodity markets, as copper prices remain under pressure and sit considerably lower than a year ago, whilst gold prices have enjoyed a rally since the start of 2016.
"On completion of the acquisition of Minera Seafield, the company will have a near term gold production opportunity at the Miraflores project combined with the drill ready gold/copper porphyry system identified at Tesorito, and access to a number of prospective concessions in the Quinchia district with potential to substantially increase the existing NI 43-101 mineral resource of 2.8 million ounces of gold," said Managing Director William Howe.
Separately, Metminco said Wednesday it has issued 2.1 million shares after options were exercised, raising a total of AUD10,500. Metminco also issued another 6.0 million shares with a value of AUD30,000 to LinQ Corporate Pty Ltd to settle outstanding fees owed by the company.
Metminco shares were down 1.8% to 0.270 pence per share on Wednesday afternoon.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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