The company will pay a consideration of $30m and guarantee a pre-existing royalty deal between the ICA and its retiring shareholders to receive 20,000oz of gold, delivered at a higher of 900oz per quarter, or 25% of the production in three years
Australia-based minerals processing company Elmore has executed agreements to acquire the Peko project, together with all related project entities, for a purchase price of $30m.
Peko is a magnetite, copper, cobalt, gold and bismuth project, located about 10km South East of Tennant Creek in the Northern Territory, 900km south of Darwin.
Elmore has now finalised the binding purchase agreements, subject to shareholder and relevant government approvals and standard share transfer administration.
The company will pay a $30m consideration and guarantee a pre-existing royalty deal between the ICA and its retiring shareholders to receive 20,000oz of gold.
It will deliver the gold at a higher of 900oz per quarter, or 25% of the production from the beginning of production, in a period of three years.
Elmore is funding the acquisition through a vendor finance agreement.
The vendor finance facility provides the company with adequate time to both refinance the facility using a long-term debt and reduce the facility with cash flows from the project.
Elmore managing director David Mendelawitz said: “With magnetite production underway, near-term copper and cobalt production forecast and multiple potential sources of gold, Peko offers a wide range of income streams to act as both additions to revenue and hedges to each other during market fluctuations.
“Whilst the purchase of the project was not something that we had expected or planned for, after being involved with Peko for the last few years we believed that it was an opportunity that we could not pass up.
“Now that our focus is broadening beyond the stockpile, we can see that Peko has the potential to be significantly more to Elmore that we had previously planned and we look forwards to being part of this project and the local community for many years to come.”
In mid-2021, ICA’s retiring shareholders, collectively called Peko Gold Lending, have taken control of the Peko project.
Peko Gold Lending asked Elmore to manage the construction and everyday operations of the project under a duly executed management agreement.
The company has completed the construction and commissioning of the Stage 1 Magnetite Recovery Plant, which is now producing magnetite products with regular deliveries.
As the project construction has been completed, and production commenced, Peko Gold Lending shareholders decided to exit the project to focus on their core competence.
The shareholders are primarily focused on funding conventional construction projects and are not experienced with mining, minerals processing or exploration projects.
Elmore said that the transaction will provide a reasonable rate of return to Peko Gold Lending, and significant returns to the company in the future.