by Greg Klein | July 21, 2016
A metal purchase agreement could help Golden Dawn Minerals TSXV:GOM re-open two gold-copper mines at the Greenwood project, 500 kilometres east of Vancouver. Under a letter of intent announced July 21, RIVI Capital would get 12% of production from the Greenwood’s Lexington and Golden Crown mines for $400 per gold-equivalent ounce for the project’s life. (All figures are in U.S. dollars, except where noted.)
The metal stream would cost RIVI $3 million on signing the final agreement and another $1 million within four months of Greenwood reaching 85% of its production target of 200 tonnes per day. Golden Dawn would pay 10% interest on the first $3 million until the company achieves 85% production.
The Greenwood project consists of a flotation mill with 220 to 400 tonnes per day capacity, as well as the Lexington and Golden Crown mines. Not included in the LOI are Golden Dawn’s May Mac silver-gold mine, mill and tailings pond 15 kilometres away.
Golden Dawn retains the right to reduce the stream from 12% to 6% and increase the payment from $400 to $650 after delivering 15,000 ounces, provided gold’s one-year average price stays above $1,200. RIVI retains the right to maintain a member on Golden Dawn’s board.
Break fees would come to $50,000 for RIVI or $100,000 for Golden Dawn. The parties expect to close within 60 days.
The deal would have minimal effect on Greenwood’s PEA, Golden Dawn stated. Released in April, the study calculated an after-tax NPV of C$23.2 million and IRR of 61.5%. With the advantage of existing infrastructure, a six-month pre-production period would require a capex of C$9.7 million for a mine lasting five years.
Greenwood’s Lexington-Grenoble past-producer has measured and indicated resources of 96,300 gold-equivalent ounces and an inferred 2,300 gold-equivalent ounces. The Golden Crown mine currently holds 62,500 gold-equivalent ounces indicated and another 13,100 inferred.
The company hopes to restart Lexington first, using the Golden Crown mill. The plan would have Golden Crown mining follow, with May Mac coming later.
Golden Dawn holds a 100% option on Greenwood. Last month the company offered secured debentures, endeavouring to raise a minimum of $3 million. This week Golden Dawn closed the final tranche of a private placement totalling C$425,000. Another placement brought C$200,000 in May.