RE: Solg5 Feb 2019 15:55
In 2011, Cornerstone Capital Resources Inc. (TSXV:CGP) purchased the
property from SBGC, where SBGC retained a 2% NSR on the Cascabel
concessions with a full buyback option of US$4M that we expect to be paid
before commercial production.
In April 2012, Cornerstone and SolGold (then Solomon Gold) entered into a JV
agreement whereby Cornerstone retains a 15% free carried interest in
Exploraciones Novomining S.A. (ENSA), the joint venture company that owns
100% of the Cascabel concessions, until the completion of a NI 43-101 definitive
feasibility study (DFS). At which point Cornerstone will be required to fund
its proportionate share of ongoing expenditures and a failure to do so will
result dilution of project interest and eventual conversion of
Cornerstone’s interest to a 0.5% NSR, which may be bought back by
US$3.5M. In the event of an asset sale by Cornerstone, SolGold holds preemptive rights over any disposals made by the company.
Following the completion of a DFS and assuming Cornerstone funds its
proportionate share of ongoing expenditures (includes construction financing),
SolGold will receive 90% of Cornerstone’s share of earnings from
Cascabel until the aggregate amount of expenditures (15% of pre-DFS
expenditures) incurred by SolGold are recouped, with the addition of
interest at LIBOR +2% from the dates such expenditures were incurred.
With the assumption of a DFS being completed in CQ4 2020E, we estimate
Cornerstone’s pre-DFS share of Cascabel expenditures to be ~C$44M, which
includes the recent estimate of C$16.0M (A$16.3M) in SolGold’s most recent
financial statements ended June 30, 2018. Based on projected cash flows from
our Cascabel model, we expect the ~C$44M to be recouped by SolGold by Year
2 of commercial production (CQ2 2025E).
Snippet from Redklouds initial estimates
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