Besra secures development funds for 3Moz Bau gold project

Besra has secured the crucial piece of the puzzle needed to bring its 3Moz Bau gold project into production, signing a funding deal of up to US$300m with major shareholder Quantum Metal Recovery.

The gold pre-purchase and offtake funding term sheet, which is essentially a deposit paid on future production ounces over 30 months, has several crucial things going for it.

Not only does the term sheet fully fund bringing the Bau project in Sarawak, Malaysia, into production and appraising other deposits within the Bau goldfield corridor, it is also expected to remove the need for dilutive equity financing and project/corporate debt encumbering Besra Gold (ASX:BEZ) with hedging requirements or other conditions.

Needless to say this will set the stage for the company’s transformation into a substantial gold producer – a remarkable achievement given that it only listed in October 2021.

“This funding will completely alter Besra’s trajectory and gives us a clear pathway to gold production at the Bau Project,” chairwoman Jocelyn Bennett said.

“At a time when access to capital for emerging gold producers is difficult and typically highly dilutive, the board is very pleased to have removed this impediment to Besra’s growth.

“We now have clear line of sight on commencing production at Bau with our issued capital intact, as well as recourse to little, if any, debt and the restrictive covenants typically required by lenders.

“At completion Besra will have immediate access to funding to advance the Project.”

The road to production

The funding will allow the company to immediately refresh its 2013 Feasibility Study, which had originally envisaged a base case +110,000oz gold open-pit mine with a four year life of mine based on a 1.1Moz Measured and Indicated resource and a 12-18 month construction period.

The updated study will refresh cost estimates for a +100,000oz project, which will benefit from drilling in 2021-22 that confirmed standalone development potential including higher grades at the Jugan ore body.

This update will also incorporate updated Resource estimations as well as onsite pilot processing plant metallurgical studies.

Funds will also be used to accelerate plans to start pilot production in the current financial year, for which the design of the 200t per day plant is currently being reviewed, as well as exploration to test the Exploration Target of between 4.89Moz and 9.27Moz of gold.

Work will also be carried out to convert existing Inferred ounces into the higher confidence Measured and Indicated categories.

Gold pre-purchase and offtake funding

The US$300m facility will be available to Besra by way of Quantum paying a 5% deposit of the Reference Price – the five-day average of the London Metal Market gold price with a floor price of 115% of the all-in-sustaining cost at the time of delivery – on future gold production up to 3Moz.

Post completion of the Term Sheet, funding will be available to the company at a rate of up to US$10m per month with an initial US$2m available immediately and another US$3m upon execution of the facility agreement.

Once production begins, Besra will receive the remaining 85% of the Reference Price – including the discount of 10% and less the pre-paid deposit) – for each ounce of gold covered by the facility delivered to Quantum.

Deliveries to Quantum are to be made from all gold produced up to 25,000 ounces of gold and thereafter 65% of gold produced, leaving 35% of production unassigned.

Bau gold project

Bau is located just 30km from Kuching, Sarawak, at the western end of an arcuate metalliferous belt extending through Borneo that is associated with significant gold mining – including the 7Moz Kelian and 3Moz Mt Muro projects – in the Indonesian portion of the island.

The field itself is defined by a gold mineralisation system covering a 15km by 8km corridor where the company has already defined total resources of 72.6Mt grading 1.4g/t gold, or 3.3Moz of contained gold, within a number of discrete deposits.

This article was developed in collaboration with Besra Gold (ASX:BEZ), a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.