Theta Gold nab stream deal with Sprott

Theta Gold has executed a US$70m (A$110m) non-binding funding term sheet with Sprott Streaming and Royalty (Sprott) for its TGME Gold Project in South Africa.

Sprott’s gold stream cash will provide pre-development, development capital and operating expenditure to bring the project into production and reach positive cash flow in return for up to 100,000 ounces of gold to be delivered from TGME over its Life-of-Mine (LOM).

The company says the stream is a key step on the path to development, since it covers 90% of the first stage of US$77m peak funding requirement and a confidence boost for Theta Gold Mines (ASX:TGM) to achieve a 160,000oz/pa production profile within five years.

Plus, the TGME Stream allows the company to gain full exposure to future gold price movements as it does not require Theta to set up minimum hedging positions.

Financing milestone unlocked

Executive chairman Bill Guy says the deal is a ‘significant milestone’ in the company’s financing efforts for the construction of the project.

“Sprott Streaming & Royalty is an experienced and well-regarded project finance partner to the mining industry; its parent Sprott Inc. is a New York Stock Exchange (NYSE) and Toronto Stock Exchange dual-listed group, and we are excited to be working with Sprott to redevelop South Africa’s very first gold field,” he said.

“The streaming deal is a much more cashflow friendly style of financing compared to a straight debt finance.

“It is less risky to a start-up project where the unique repayment mechanism provides the company the flexibility to manage its cashflow as long as the minimum gold delivery requirements are met.”

Gold stream details

Sprott will pay 10% of the gold price for the ounces delivered under the stream and Theta has the option to buy-back 50% of the stream based on a pre-agreed price, following which it will deliver 2% of the ongoing gold production.

Prior to initial gold delivery, the company will pay in cash or scrip (at 10% discount to 5 days volume-weighted-average-price (VWAP) on a semi-annual basis, 9.5% per annum interest to Sprott for the funds advanced.

Closing is scheduled by the first quarter of 2023, conditional on completion of due diligence, final definitive documentation, cost to complete certificate and South African regulatory approvals.

Room to grow resource

The company recently published a definitive Feasibility Study (FS) for the project demonstrating robust economics for a horizontal stope underground mining and milling operation with low initial capital cost and high rate of return.

An Environmental Impact Assessment (EIS) is ongoing and is expected to be completed later this year, along with the final approvals for two Water Use Licenses (WUL) under application.

And the company is confident there’s potential to expand the mineral resource, with access to over 43 historical mines and prospect areas that can be explored.

“Once the Sprott funding is closed, the company may commit to further upgrading our Ore Reserve base, as well as to potentially further expand our total mineral resource in order to increase production scale and life of mine from the existing stage one definitive Feasibility Study mine schedule,” Guy said.

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This article was developed in collaboration with Theta Gold Mines (ASX:TGM), 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.