Besra soars as binding US$300m deal opens door to develop 3Moz Bau gold project

The quality of Besra Gold’s 3 million ounce Bau gold project in East Malaysia has long been recognised, but the realisation it has funding certainty has lit investors’ eyes up to its true potential.

The ~$100 million capped junior is up over 850% over the past six months and surged another ~50% this morning after a US$300 million gold purchase agreement with major shareholder Quantum Metal Recovery became binding, giving effect to a non-binding term sheet announced in March.

Besra’s (ASX:BEZ) financing deal is believed to be one of the largest funding arrangements of its kind signed by an ASX-listed junior, fully funding production at Bau as well as drilling to appraise a string of other deposits in the Bau goldfield corridor.

The first US$2 million of the initial US$5m deposit has been received by Besra, with the funding expected to be delivered at a rate of up to US$10m a month following completion of Conditions Precedent.

That will remove the need for dilutive equity finance or corporate debt which would encumber Besra with hedging requirements, sweeps or covenants once it is generating income.

Under the terms of the deal Besra will sell Quantum refined gold from Bau until 3Moz has been received by Quantum or aggregate deposits equivalent to US$300m have been received by Besra from Quantum.

Management changes

On top of the deal’s close, Besra has rung in the changes in a bid to move from exploration to development at Bau, with CEO Dr Ray Shaw moving into a chief technical officer role to focus on in-country development and exploration activities in Malaysia.

Acacia Executive Search has been appointed to recruit a replacement CEO, while Jocelyn M. Bennett has been appointed to assume the role of Besra’s Executive Chair.

“The announcement of progress on this landmark agreement, as well as the accompanying corporate changes, moves Besra’s 3Moz Bau Gold Project closer to production,” Bennett said.

“In particular, this extraordinary funding deal should provide ample funding for the development of Bau and allows us to bring the project into production in a way that is uniquely non-dilutive to our shareholders and to retain exposure to gold price movements, free of hedging or other onerous covenants.

“Whilst we have several Conditions Precedent yet to fulfil, we expect the US$300m facility to be fully operational by June 30, 2023.

“I would also like to take this opportunity to thank Ray Shaw for his valuable contribution as CEO of Besra over many years and the work he has led to date on the Bau Project. We feel that the development and exploration potential of the project he has helped unlock should be the envy of our peers.”

Dr Shaw’s previous corporate duties will be shared by Bennett and executive director John Seton.

Bau contains a JORC 2012 compliant resource including 3.4Mt at 1.5g/t for 166,900oz in measured resources, 16.4Mt at 1.6g/t for 824,000oz in indicated ounces and 47.9Mt at 1.3g/t for 1.99Moz in inferred resources.

On top of that, Besra has a global exploration target at Bau of 4.89-9.27Moz at 1.7-2.5g/t.

Quantum has a strong incentive to support the project’s development. Quantum’s executive chairman Dato Lim Khong Soon says the funding arrangement will support its bullion trading division.

“We are most pleased to have taken the next step in a long-term involvement with Besra and the Bau Goldfield,” he said.

“This opportunity to secure a material long term supply of gold for our bullion trading business is very propitious, and we expect to commence deposit of funds following satisfaction of the conditions.”

This article was developed in collaboration with Besra Gold, 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.