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RNC Minerals signs purchase agreement for Spargos Reward gold project; proposes name change

The project, located in Western Australia, contains a historical mineral resource estimate of 112,000 ounces (oz) indicated resources and a 19,000 oz of inferred resources

Royal Nickel Corp - RNC Minerals signs purchase agreement for Spargos Reward gold project; proposes name change
RNC chairman and CEO Paul Andre Huet said the project could generate "substantial cash flow with little risk"

RNC Minerals (TSX:RNX) has signed a sale and purchase agreement to acquire the Spargos Reward gold project in Western Australia.

The company said the project contains a historical JORC1 2012 mineral resource estimate of 112,000 ounces (oz) of indicated resources and 19,000 oz of inferred resources.

READ: RNC Minerals posts solid first quarter financials and is confident on output for 2020

Under the terms of the agreement, RNC will make a non-refundable payment of A$25,000 payable on signing for an exclusive three-month period to complete due diligence.

Settlement of the acquisition will be conditional on the satisfaction of certain conditions, including satisfactory due diligence, receipt of all necessary regulatory approvals and third-party consents.

On closing, RNC will be required to pay A$4 million, satisfied at RNC's election in cash, RNC shares, or a combination of cash and shares.

In a statement, Paul Andre Huet, chairman and chief executive of RNC Minerals said: "The potential addition of a near term high-grade open pit gold project such as Spargos Reward, which is located close to our Higginsville treatment plant, is a very compelling opportunity. In our view, Spargos Reward has the potential to be fast tracked into our growing production pipeline and generate substantial cash flow with little risk to RNC and its shareholders.

"Importantly, the sale and purchase agreement structure allows RNC an exclusive window during which to conduct a thorough due diligence program over the next three months before making a decision to close the transaction."

The company also announced that it is proposing to change its name to Karora Resources Inc, which it said will “more accurately reflect its business focus as a growing, profitable gold producer in Western Australia”.

The name change proposal will be voted on by shareholders at the company’s virtual annual general and special meeting to be held on June 11.

RNC eliminates NSR royalties at Higginsville

In further developments, RNC also announced later Monday that Morgan Stanley Capital Group Inc has agreed to terminate the remaining NSR royalty interests it holds in a number of tenements at the Higginsville site for a purchase price of US$9 million in cash.

Once completed, all remaining NSR royalty obligations will be eliminated with the exception of the mandatory Western Australia state royalty of 2.5%, RNC said. 

The purchase price of US$9 million will be satisfied as follows: 30% (US$2.7 million) paid immediately -- with the remaining 70% paid over 30 months (US$1.26 million every six months).

RNC said the transaction will eliminate the current 1.75% legacy NSR royalty held by Morgan Stanley on the first 10,000 ounces of gold sold per annum (up to a cumulative 110,000 ounces) and the 2% NSR royalty on ounces sold in excess of 10,000 per annum. 

--ADDS to update with Morgan Stanley's move to sell NSR stake-- 

Contact the author of this article at [email protected]

Follow him on Twitter at Cal_Proac

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