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Orea Mining (TSX: OREA) has inked an amended deal with Norgold to acquire the Russian miner’s 55.01% interest in the Montagne d’Or gold project in French Guiana.
Orea had expected to close this proposed deal in late February, but it was delayed due to sanctions imposed by the Canadian government on Nordgold’s Russian controlling shareholders.
In August 2022, Orea announced that it would be buying out Nordgold’s majority stake in the 5-million-oz. project, which has reached a development stage, for C$100 million. This amount will only be payable when the Montagne d’Or JV receives all permits necessary for mine construction.
However, Orea’s permit application regarding the acquisition was recently denied by the Canadian government, forcing the company to terminate the deal last month.
“It is the understanding of Orea and its legal advisors that there are no conditions under which Canada will approve the acquisition, even though other countries that are close allies of Canada have approved or not objected,” Orea stated in a June 13 news release.
The Vancouver-headquartered miner has since retracted the termination and subsequently worked out an amended agreement, under which the C$100 million payment will only be made if and when all sanctions are lifted against Nordgold and its shareholders in all applicable jurisdictions, including in Canada, the US, France, the UK and the EU.
The amended deal also stipulates that the payment will no longer be due or payable if sanctions are still in effect three years from receipt by Orea of all permits to operate a gold mine at Montagne d’Or, and seven years from closing of the acquisition.
The applicable sanctions authorities are now reviewing the amended agreement, Orea stated in a news release on Thursday, adding that the modified deal has resulted to be more favourable to Orea.
Meanwhile, the company, which owns the project’s other 44.99% stake, is awaiting a decision by the Supreme Court of France regarding the renewal of the Montagne d’Or mining titles.
The open pit gold project currently hosts measured resources of 10.3 million tonnes grading 1.8 grams gold per tonne for 600,000 oz., indicated resources of 74.8 million tonnes at 1.3 grams gold for 3.2 million oz., and inferred resources of 20.2 million tonnes at 1.4 grams gold for 960,000 ounces.
A feasibility study produced in 2017 gave Montagne d’Or an after-tax net present value (using a 5% discount rate) of $370 million and an internal rate of return of 18.7% using a gold price of $1,200 per ounce. The initial capital cost was estimated at $361 million, with a payback period of 4.1 years.
The project was expected to average 214,000 oz. per year over a 12-year mine life, though production over the first 10 years of the mine will average 237,000 oz. annually. All-in sustaining costs are $779 per oz. of gold over the life of the mine, including closure and reclamation.
Following the amended agreement, Orea’s share price saw a significant bump on Thursday, up 40% to 3¢ apiece in late afternoon trading in Toronto for a market capitalization of C$5.6 million.
*The original version of this article incorrectly stated that Orea Mining had deferred the buyout deal. The company only amended it and the new version is in hands of sanctions authorities. We regret the error.
Comments
IR
For clarity, Orea has not differed the buyout. The amended Agreement has been fully executed by Orea and Nordgold and now waiting for its review by the sanctions authorities.
The agreement was amended, signed and resubmitted for consideration of the sanctions authorities. As amended, the agreement has resulted to be more favourable to Orea.