Caldas Gold, Wheaton announce planned streaming deal for Marmato project
(Kitco News) - Caldas Gold Corp. (TSXV: CGC) would receive $110 million in a streaming agreement with a subsidiary of Wheaton Precious Metals Corp. (TSX: WPM, NYSE: WPM), with the proceeds to be used for the Marmato project in Colombia, under a non-binding term sheet announced by the companies Monday.
Caldas Gold also announced the planned issuance of “units” – in the form of notes and share purchase warrants – to raise another $150 million to help fund the project.
“The streaming transaction is the first step in securing the project financing required to build Colombia’s next major gold mine,” said Serafino Iacono, chairman and chief executive officer of Caldas Gold. He later added, “The streaming transaction will help us to manage the overall leverage in our capital structure while improving flexibility and reducing financing costs and risks.”
Randy Smallwood, president and chief executive officer of Wheaton, said the “strength and potential upside of this project was especially apparent during our onsite due diligence trip” made prior to pandemic-related travel restrictions.
“We remain unwavering in our focus on delivering the highest-quality portfolio of precious-metals production to our shareholders through our top-tier asset base, strong organic growth profile and acquisition of accretive growth opportunities such as Marmato,” Smallwood said.
Upon entering into the precious-metals stream, subsidiary Wheaton Precious Metals International Ltd. will purchase 6.5% of the gold production and 100% of the silver production until 190,000 ounces of gold and 2.15 million ounces silver have been delivered, the companies said. After that, the stream drops to 3.25% of the gold production and 50% of the silver production for the life of mine.
Of the $110 million total in the proposed precious-metals stream, $38 million would be payable upon closing and the remaining portion would be payable during the construction of mining operations in the “Deeps Zone” at Marmato, subject to receipt of required permits and licenses, sufficient financing to cover total expected capital expenditures and other customary conditions. In addition, WPMI will make ongoing payments equal to 18% of the spot gold and silver price until the uncredited portion of the upfront payment is reduced to nil, and 22% of the spot gold and silver price thereafter.
Both companies said the deal to enter into the precious-metals stream is “subject to among other matters, the negotiation and completion of definitive documentation.”
Meanwhile, Caldas Gold said that it plans to offer up to 150,000 “units” of the company for anticipated proceeds of up to $150 million. Each “unit” is expected to consist of $1,000 principal amount of senior secured gold-linked notes and a number of common share purchase warrants to be determined based on market conditions.
Concurrently, based on market conditions, Caldas Gold also said it is considering equity financing on a best-efforts private placement basis of up to C$50 million, consisting of common shares and common share purchase warrants.
Plans call for net proceeds of the offering and any equity financing to be used for the expansion of underground mining operations at Marmato, construction of an additional 4,000 tonnes-per-day processing plant and additional tailings storage facilities, and to escrow funds for the payment of interest during the first two years on the notes, Caldas Gold said.