Sprott will make an immediate payment of $20 million to Treasury Metals in return for a 2.5% 2.2% net smelter returns royalty covering all mineral produced from the Goliath gold complex.
Treasury intends to use the funding to advance the Goliath project to a construction decision.
“With the desire to consider financing alternatives that are less dilutive to our shareholders, we undertook a process to explore the potential for the sale of a royalty that culminated in the agreement we announced today,” said Treasury president and CEO Jeremy Wyeth in a release.
“Upon closing, the company is well funded with this $20 million (C$25.5 million) financing, in addition to the C$6.5 million flow financing we completed in November 2021 and the C$9.9 million in cash we had at the end of the third quarter of 2021, providing the necessary funding and financial flexibility to take Treasury through studies, permitting and community consultations to a construction decision.”
Treasury Metals retains the right to buy back 50% of the royalty. Closing, subject to customary conditions, is expected at the end of March 2022.
The preliminary economic assessment prepared for the Goliath gold complex last year estimated the pre-production capital cost to be C$232.6 million, followed by sustaining costs of C$289.6 million. The project has an anticipated mine life of 13.5 years.
The study outlined a post-tax net present value (at a 5% discount rate) of C$328 million for Goliath, with an internal rate of return of 30.2%. The project would pay for itself in 2.2 years. The estimated all-in sustaining cost per ounce of gold is $911.
Measured resources in the Goliath deposit include 1.5 million open pit tonnes grading 1.9 g/t gold for 90,000 oz. and 98,000 underground tonnes at 4.94 g/t gold, containing 16,000 oz.
Indicated resources include 27 million open pit tonnes at 0.87 g/t gold for 757,000 oz. and 2.6 million underground tonnes at 3.16 g/t gold for 263,000 oz. In addition, there are 24.3 million open pit tonnes at Goldlund grading 1.97 g/t gold for 840,000 oz.
The total measured and indicated resource is 55.4 million tonnes grading 1.1 g/t gold, containing approximately 2 million oz.
The inferred resource for the Goliath, Goldlund and Miller deposits (both open pit and underground) totals 21 million tonnes grading 0.78 g/t gold, containing an additional 528,000 oz.
A gold price of $1,700 per oz. was used to estimate resources. A cut-off of 0.25 g/t gold was used for open pit resources, and a cut-off of 1.6 g/t gold was used for underground resources.
(This article first appeared in the Canadian Mining Journal)
