RNC Minerals Corp (TSE:RNX) is poised to buy Westgold Resources Ltd's mine and mill in Western Australia for a total of A$50 million, which will provide significant synergies, the resource firm said, as it also unveiled a $12 million bought deal financing.
RNC owns the producing Beta Hunt gold mine and buying the Higginsville mill, built in 2007, represents a significantly lower-cost milling alternative for Beta Hunt.
The group says it has entered into a purchase option agreement with Westgold Resources and expects that processing cost savings would be over C$15 per tonne, or a 35% reduction. The move would also add an expected 40,000 to 45,000 ounces of gold production in 2019.
Mark Selby, RNC's president and CEO said the move would save more than US$100 per ounce compared to its current toll milling arrangements.
He added: "The transaction would transform RNC's gold operation in Western Australia to a multi-mine operation anchored by the 1.3 Mtpa HGO Mill, the exciting high grade and substantial resource potential at Beta Hunt, and a large land position in the Kalgoorlie gold region.
"The option structure allows RNC to assess a full range of financing options and ultimately choose the most accretive solution for shareholders."
The Higginsville operation boasts a 367,000 ounce reserve within a 1.2 million ounce measured and indicated (M&I) gold resource, and a further 0.9 million ounce inferred resource, all on a 386 sq km land position in the Kalgoorlie gold region.
It is worth noting that RNC successfully tolled Beta Hunt material through the HGO mill in 2018, and achieved a 94% gold recovery.
Significant exploration potential
RNC noted that acquisition brings with it significant exploration potential, with 200 mining titles comprising over 38,600 hectares in the prolific gold region between Kambalda and Norseman.
Terms are that RNC will make an option payment of A$4 million, payable immediately in company shares, for an exclusive 40-day period to complete due diligence.
Closing would occur 30 days later if the option is exercised. On closing, RNC would pay a further A$21 million in RNC shares and A$25 million in cash for total consideration of A$50 million, which includes the A$4 million deposit satisfied in RNC shares.
Also on Tuesday, RNC announced that it had struck a deal with a syndicate of underwriters co-led by Haywood Securities and Cantor Fitzgerald Canada, who have agreed to buy, on a bought-deal basis, over 24.4 million shares at $0.49 each for gross proceeds to RNC of $12 million.
Net proceeds will be used for exploration drilling and to advance the Beta Hunt mine and on closure of the proposed acquisition of the Higginsville gold operations.
There is also an overallotment option, which is exercisable at the issue price for 30 days following closing to buy a further 3.6 million shares, or 15% of the shares offered.
The offering is scheduled to close on or around April 18 this year.
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