Navarre Minerals (ASX:NML) is poised to become a gold producer after reaching a deal to acquire the currently operating Mt Carlton Operations from Evolution Mining.

The acquisition of the Mt Carlton mine and Crush Creek project in Queensland will be transformational for the company as the open pit and underground mining operation has produced about 700,000oz of gold since it was commissioned in 2013.

Future gold production is also assured with Evolution Mining (ASX:EVN) forecasting in August this year that the project would produce between 45,000oz to 50,000oz in the 2022 financial year.

Potential for growth is included with the acquisition including a tenement package of about 815 sq km.

The company will acquire the assets for an upfront consideration of $40m – including up to $20.4m worth of shares in the company, implying a payback period of about nine months.

A further $25m of contingent payments are payable on cumulative gold production milestones from Crush Creek, along with a further $25m in the form of a 5% gold price linked royalty when the spot price exceeds $2,250 per oz in a given quarter.

Navarre adds that Mt Carlton will become its cornerstone asset, and clearly identified near mine and greenfield exploration upside to underpin future mine life extension and potential expansion.

Managing director Ian Holland said the transaction is truly transformational for the company as Mt Carlton is a proven, high-margin operation that makes it an attractive vehicle for the transition into a gold producer.

“Under the transaction, Navarre will inherit a well-established operation and a highly experienced site operating team and workforce which we are confident will fit in with Navarre’s own culture and focus on potential for further discovery and resource addition,” he added.

“We also welcome Evolution’s strong support for the Navarre team and longer-term potential of the Mt Carlton Operations, as evidenced by their agreement to subscribe for Navarre shares in connection with the transaction.”

 

Mt Carlton Operations

The Mt Carlton Operations are located about 150km south of Townsville and consist of an open pit, underground mine and a 950,000 tonne per annum plant situated on a 815 sq km tenement package.

Future mining operations are supplemented by the nearby Crush Creek deposit, which currently hosts a resource of 126,000oz of gold grading 3.5 grams per tonne (g/t) that was delineated after just nine months of concentrated drilling.

Mt Carlton produced 58,371oz of gold in the 2021 financial year at an all-in sustaining cost of $1,937 per oz, delivering net mine cash flow of $19.6m in the fourth quarter alone.

The project is forecast to produce between 45,000oz to 50,000oz in FY2022 at an AISC of $1,650/oz to $1,700/oz with economic benefits accruing to Navarre from 1 October 2021.

Overall Mineral Resources as at 31 December 2020 are 9.53 million tonnes at 1.26g/t for 387,000oz of contained gold while ore reserves stood at 168,000oz of contained gold.

 

Acquisition funding

The $40m upfront component will be funded through a fully underwritten placement of up to 533 million shares priced at 7.5c each to new and existing investors to raise up to $40m.

This represents a 18.5% discount to the last traded price of the company’s shares as at 4 October.

Highlighting his belief in the value of the acquisition, Holland has committed to subscribing for $1m worth of shares under the placement.

Navarre will also issue up to $20.4m worth of new shares to Evolution, though this will be scaled back to $10m if the full amount is raised under the placement.

This article was developed in collaboration with Navarre Minerals, 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.

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