Sarama Resources (SWA-V) Nov 27, '14 is pleased to announce that it has entered into an agreement with Acacia Mining plc ("Acacia", formerly known as African Barrick Gold plc) relating to Sarama's South Houndé Project (the "Project") in Burkina Faso whereby Acacia will have the option to earn up to a 70% interest in the Project by satisfying certain conditions over a 4-year earn-in period and then the right to acquire an additional 5% interest, for an aggregate 75% interest in the Project, upon declaration of a minimum mineral reserve.
Highlights
Key commercial terms of the agreement are as follows: Acacia makes a cash payment of US$1 million to Sarama upon completion; Acacia will earn a 50% interest in the Project upon the expenditure of US$7 million by the end Year 2; Acacia will earn an additional 20% interest, for an aggregate 70% interest in the Project upon the expenditure of a further US$7 million by the end Year 4; upon Acacia acquiring a 70% interest in the Project, Sarama and Acacia will advance the Project under a joint venture arrangement with both parties funding the venture according to their proportionate interests; and upon attaining a 70% interest in the Project, Acacia will have the right to acquire an additional 5% interest, for an aggregate 75% interest in the Project, upon the declaration of a mineral reserve of at least 1.6 million ounces of gold.The arrangement provides funding to build upon the existing 1.5Moz Au1,2 mineral resource and advance the Project to the next stage of development. Sarama remains an active explorer in Burkina Faso and will independently pursue its other exploration interests in the Houndé Belt and the country (refer Figure 1). Sarama's President and CEO, Andrew Dinning, commented:
"Sarama is pleased to have entered into this arrangement with Acacia Mining (formerly known as African Barrick Gold) who from a strong operational base in Tanzania, is seeking to fulfil its growth aspirations. Acacia's decision to gain exposure to West Africa and Burkina Faso via this arrangement endorses Sarama's exploration and technical work to date and supports the Company's belief that the South Houndé Project has significant potential to build upon the current mineral resource.
Importantly, partnering with Acacia will allow exploration of the Project to continue, with a view of creating value for the partners. This is an excellent outcome for Sarama shareholders at a time where additional equity financing would result in significant dilution."
The agreement is structured with an initial earn-in phase by Acacia, converting to a joint venture phase subject to Acacia meeting certain milestones and conditions. Additional commercial terms, include the following:
If Acacia does not incur expenditure of at least US$3.5 million in the Year 1, the agreement will terminate and Sarama will retain a 100% interest in the Project. If Acacia incurs expenditure of at least US$3.5 million in the Year 1, but does not incur expenditure of at least US$5 million by the end of Year 2, the agreement will terminate and Sarama will retain a 100% interest in the Project. If Acacia incurs expenditure of at least US$3.5 million in Year 1, but only incurs a minimum aggregate expenditure of US$5 million by the end of Year 2, Acacia will earn a 25% interest in the Project, the earn-in phase will terminate and Sarama and Acacia will advance the Project under a joint venture arrangement with both parties funding the venture according to their proportionate interests. In that event, Sarama will have the right to acquire Acacia's interest in the Project by making a payment equivalent to 1.5 times Acacia's aggregate expenditure to the time of exercise of this right. If Acacia earns a 50% interest in the Project, but does not incur expenditure of at least US$3.5 million in the ensuing 1-year period, Acacia will remain at a 50% interest in the Project, the earn-in phase will terminate and Sarama and Acacia will advance the Project under a joint venture arrangement with both parties funding the venture according to their proportionate interests. If Acacia earns a 50% interest in the Project and incurs expenditure of at least US$3.5 million in the ensuing 1-year period, but does not incur aggregate expenditure of at least US$7 million in the 2-year period after acquiring the 50% interest, Acacia will remain at a 50% interest in the Project, the earn-in phase will terminate and Sarama and Acacia will advance the Project under a joint venture arrangement with both parties funding the venture according to their proportionate interests. If Sarama and Acacia, whilst operating under a joint venture arrangement after Acacia has earned a 70% interest in the Project, are successful in declaring a mineral reserve of at least 1.6Moz gold in accordance with National Instrument 43-101, Acacia will acquire an additional 5% interest in the Project, upon payment to Sarama of an amount equal to 5% of the expenditure incurred by the parties from the time that Acacia earned its 70% interest in the Project to the declaration of the mineral reserve. Any joint venture arrangement between Sarama and Acacia will contain usual dilution provisions. If while Sarama and Acacia are operating under a joint venture arrangement either party's interest is diluted to less than 10%, their interest will convert ("conversion") to a net smelter return ("NSR") royalty as follows: in the case of Sarama, a 2% NSR royalty. Acacia will have the right to reduce the royalty to a 1% NSR royalty upon payment of US$3 million to Sarama within 90 days of conversion; and in the case of Acacia, a 1% NSR royalty, capped at 1.2 million ounces of gold produced. In either case, the royalty will become payable upon the earlier of: (i) completion of 2 years of commercial production; or (ii) production of 400,000 ounces of gold from the Project after conversion.
Sarama will continue to act as the operator of the Project, and subject to certain conditions, will remain the operator of the Project unless and until Acacia exercises its right to assume the role of operator after earning a 50% interest in the Project.
The agreement is subject to the satisfaction of conditions to completion that are usual in an agreement of this nature. The TSX Venture Exchange has provided conditional approval of the agreement, on usual conditions.
For further information on the Company's activities, please contact:
Andrew Dinning or Paul Schmiede
e: info@saramaresources.com
t: +61 (0) 8 9363 7600 |
