Upon closing of the transaction, Maverix will own a combined 2.5% NSR royalty on Hope Bay
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Maverix Metals is pleased to announce that it has agreed to acquire an additional net smelter return (“NSR”) royalty on the Hope Bay mine (“Hope Bay”) in Nunavut, Canada, owned and operated by TMAC Resources. Maverix currently owns an existing 1.0% NSR royalty on Hope Bay.
Maverix and TMAC have agreed to amend the existing royalty agreement whereby Maverix will acquire an additional 1.5% NSR royalty (the “Additional Royalty”) on Hope Bay in exchange for a cash payment of US$40 million. Upon closing of the transaction, Maverix will own a combined 2.5% NSR royalty on Hope Bay. Maverix will also be entitled to receive an additional 0.25% NSR royalty (the “Bonus Royalty”) until certain conditions with respect to the Additional Royalty are satisfied.
Transaction Highlights
Increased royalty interest in a world-class gold camp in Canada, hosting over 6 million ounces in global resources, with significant exploration potential1.
Immediately increases Maverix’s attributable gold equivalent production per share.
Accretive to Maverix’s net asset value and cash flow per share.
“Maverix is delighted to expand and support our existing relationship with TMAC through an increase to our interest at their Hope Bay mine,” commented Dan O’Flaherty, CEO of Maverix. “Hope Bay is a multi-million ounce camp with tremendous exploration and expansion potential that we expect will operate for decades. This transaction provides both immediate and long-term growth and additional gold exposure for Maverix shareholders.”
Hope Bay
Hope Bay began producing gold in early 2017, with an initial 20 year mine life2, and is expected to produce over 160,000 ounces of gold in 2019. TMAC continues to optimize the established operations at the Doris mine with ongoing productivity improvements, including the gravity project now completed and the second surge bin in full operation as of July 1, 2019.
Exploration drilling at Doris and Madrid continues to demonstrate the continuity of high-grade gold mineralization, including visible gold at Doris, increasing TMAC’s confidence in the potential to grow these established deposits considerably at depth, and then grow resources further through the prioritized exploration of the more than 90 other identified regional targets.
Doug Ward, Vice President Technical Services of Maverix, commented, “TMAC has shown that through the combination of incremental improvements to operations, practical measures taken to address challenges as they arise, and a vision commensurate with the potential of the mine, the company is well positioned to realize a successful Hope Bay operation for many years to come.”
Transaction Terms
Maverix will acquire an Additional Royalty of 1.5% on Hope Bay, effective from August 1, 2019, bringing Maverix’s total NSR royalty on Hope Bay to 2.5%.
Maverix will be entitled to a Bonus Royalty of 0.25% until the Additional Royalty is registered against the property, which is expected to occur once TMAC’s debt facility with Sprott Private Resource Lending (Collector), LP is repaid in 2021.
Maverix will make a cash payment of US$40 million to TMAC upon closing of the transaction.
TMAC will have the right to buy back 0.5% of the Additional Royalty at any time after June 30, 2021 for a cash payment of US$15 million (the “Partial Buy Back”).
After a total of three million ounces of payable gold has been produced at Hope Bay from the effective date of the Additional Royalty, the Additional Royalty will decrease to 0.75%, regardless of whether the Partial Buy Back is exercised, such that Maverix will retain a 1.75% NSR.
TMAC will have the right to buy back 100% of the Additional Royalty for a cash payment of US$50 million in the event of a change of control transaction of TMAC that is announced prior to June 30, 2021.
TMAC will have the option to pay the Additional and Bonus Royalty amounts in TMAC common shares, cash or a combination until June 30, 2021, after such date, the amounts will be paid in cash.
Concurrent with the closing of the purchase of the Additional Royalty, Maverix will subscribe for a private placement of TMAC common shares for proceeds of US$3 million.
Maverix will fund the transaction through a combination of cash on hand and drawing on its existing credit facility. Closing of the transaction is expected to occur on or around August 16, 2019.
Source: Company Press Release