TORONTO, July 22, 2020 /CNW/ - Karora Resources Inc.
(TSX: KRR) ("Karora" or the "Corporation") is pleased to announce
it has reached an agreement to sell its 28% interest in the Dumont
Nickel Project ("Dumont") to two private funds advised by Waterton
Global Resource Management, Inc. (collectively, "Waterton")
for total consideration of up to $48
million, subject to the terms and conditions of the sale
agreement.
At closing Karora will receive $10.7
million, comprised of $7.4
million from Waterton for its interest and a $3.3 million refund of Karora's share of the cash
held within the Dumont Joint Venture. Karora will have the right to
receive a portion of future proceeds of any future Dumont sale or
other monetization event. On a sale or other monetization event,
Karora will be entitled to receive 15% of the net proceeds from the
transaction (net of certain agreed costs and deductions) up to a
maximum of an additional $40.2
million. Waterton will assume operation and management of
the Dumont project through the existing management structure upon
closing of the transaction, which is expected to occur before the
end of July.
Paul Andre Huet, Chairman &
CEO of Karora, commented: "The sale of Karora's remaining 28% stake
in the Dumont project to Waterton is another clear demonstration of
our focus on building a mid-tier, profitable gold company. The
structure of the deal provides immediate cash to Karora of
$10.7 million to further invest in
increasing our gold production, cost reduction initiatives and
aggressively explore our numerous high-quality exploration targets
at our Beta Hunt and Higginsville operations. It also allows our
shareholders to participate in the upside potential of Dumont and
any surge in nickel prices through an additional payment based on
any future sale or monetization of Dumont by Waterton of up to
$40.2 million subject to the terms
and conditions of the sale agreement.
Dumont has been the foundational asset during this company's
early focus on nickel and it is very important to Karora that its
shareholders retain exposure to the future value of such a robust
development asset. Dumont remains an outstanding large-scale,
low-cost, long-life, shovel ready and fully permitted
nickel-cobalt-PGE development project. Dumont is expected to
produce an average of 39,000 tonnes of nickel per year over 30
years at an AISC Cash Cost US$3.80/lb.1 This transaction will
also simplify the Dumont management structure moving forward with a
focus on maximizing the value of the project under Waterton's
management. We look forward to participating in the value they
unlock."
1) Reference is made
to the Dumont Feasibility Study report dated July 11, 2019,
entitled "Technical Report on the Dumont Ni Project, Launay and
Trécesson Townships, Quebec, Canada" which can be found on Karora's
website at www.karoraresources.com at www.sedar.com under Karora's
profile.
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Dumont Nickel Project Management and Operation
Waterton Global Resource Management, Inc. is the advisor to the
two private funds that, on completion of this transaction, will own
100% of Magneto Investments Limited Partnership (Magneto). Since
formation of Magneto in 2017, the Dumont Nickel Project and all
associated assets, permits and agreements have been held 100% by
Magneto and have been managed by Karora's team of nickel
experts. As part of this transaction, the Dumont management
team will fully transition to Magneto to ensure the continuity of
technical expertise and stakeholder relations on the Dumont
Project.
Additional information on the Dumont Nickel Project can be found
on the Dumont Nickel website www.dumontnickel.com.
Karora Share Consolidation
Karora is also pleased to announce, as previously authorized by
its shareholders and following a determination by its Board of
Directors, the Corporation intends to file articles of amendment
implementing a consolidation of its outstanding common shares on
the basis of one (1) post-consolidation common share for every four
point five (4.5) pre-consolidation common shares (the
"Consolidation"). The Consolidation is subject to TSX approval.
Karora will issue a further press release providing the date,
expected in the next 7-14 days, on which the common shares will
commence trading on a post-consolidation basis on the TSX. The
exercise price and the number of common shares issuable under any
of the Corporation's outstanding share-based securities such as
warrants, stock options and restricted share units, as applicable,
will be proportionately adjusted upon completion of the
Consolidation. The CUSIP and ISIN numbers of the post-consolidation
common shares and warrants will also change upon the completion of
the Consolidation.
About Karora
Karora is focused on growing gold production and reducing costs
at its integrated Beta Hunt Gold Mine and Higginsville Gold
Operations ("HGO") in Western
Australia. The Higginsville treatment facility is a low-cost
1.4 Mtpa processing plant which is fed at capacity from Karora's
underground Beta Hunt mine and open pit Higginsville mine. At Beta
Hunt, a robust gold mineral resource and reserve is hosted in
multiple gold shears, with gold intersections along a 4 km strike
length remaining open in multiple directions. HGO has a substantial
historical gold resource and highly prospective land package
totaling approximately 1,800 square kilometers. Karora has a strong
Board and management team focused on delivering shareholder value.
Karora's common shares trade on the TSX under the symbol KRR.
Karora shares also trade on the OTCQX market under the symbol
KRRGF.
About Waterton Global Resource Management
Waterton Global Resource Management, Inc. ("Waterton") is the
advisor to the two private funds that jointly own 100% of Magneto
Investments L.P., the owner of the Dumont Project. Waterton is a
leading private equity firm dedicated to developing high quality
resource assets in stable jurisdictions. Waterton's founding team
has a successful track record of originating, structuring, managing
and exiting investments through acquisitions, joint ventures and
partnerships, across a range of sectors and asset classes.
Waterton's core strength is its cross-functional, fully-integrated,
in-house team of professionals who possess significant mining,
financial and legal expertise. Waterton's team employs a proactive
approach to asset management, leveraging significant sector
knowledge and extensive industry relationships to support the
firm's investment activities.
Cautionary Statement Concerning Forward-Looking
Statements
This release contains certain "forward looking statements"
and certain "forward-looking information" as defined under
applicable Canadian and U.S. securities laws. Forward-looking
statements and information can generally be identified by the use
of forward-looking terminology such as "may", "will", "should",
"expect", "intend", "estimate", "anticipate", "believe",
"continue", "plans" or similar terminology. The forward-looking
information contained herein is provided for the purpose of
assisting readers in understanding management's current
expectations and plans relating to the future. Readers are
cautioned that such information may not be appropriate for other
purposes. Forward-looking statements and information include, but
are not limited to, statements with respect to the additional
consideration or payment on any future sale or monetization
of Dumont by Waterton.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of Karora to be materially different
from any future results, performance or achievements expressed or
implied by the forward-looking statements. Factors that could
affect the outcome include, among others: future prices and the
supply of metals; the results of drilling; inability to raise the
money necessary to incur the expenditures required to retain and
advance the properties; environmental liabilities (known and
unknown); general business, economic, competitive, political and
social uncertainties; results of exploration programs; accidents,
labour disputes and other risks of the mining industry; political
instability, terrorism, insurrection or war; or delays in obtaining
governmental approvals, projected cash operating costs, failure to
obtain regulatory or shareholder approvals. For a more detailed
discussion of such risks and other factors that could cause actual
results to differ materially from those expressed or implied by
such forward-looking statements, refer to Karora 's filings with
Canadian securities regulators, including the most recent Annual
Information Form, available on SEDAR at www.sedar.com.
Although Karora has attempted to identify important factors
that could cause actual actions, events or results to differ
materially from those described in forward-looking statements,
there may be other factors that cause actions, events or results to
differ from those anticipated, estimated or intended.
Forward-looking statements contained herein are made as of the date
of this news release and Karora disclaims any obligation to update
any forward-looking statements, whether as a result of new
information, future events or results or otherwise, except as
required by applicable securities laws.
Cautionary Statement Regarding the Higginsville Mining
Operations
A production decision at the Higginsville gold
operations was made by previous operators of the mine, prior to the
completion of the acquisition of the Higginsville gold operations
by Karora and Karora made a decision to continue production
subsequent to the acquisition. This decision by Karora to continue
production and, to the knowledge of Karora, the prior production
decision were not based on a feasibility study of mineral reserves,
demonstrating economic and technical viability, and, as a result,
there may be an increased uncertainty of achieving any particular
level of recovery of minerals or the cost of such recovery, which
include increased risks associated with developing a commercially
mineable deposit. Historically, such projects have a much higher
risk of economic and technical failure. There is no guarantee that
anticipated production costs will be achieved. Failure to achieve
the anticipated production costs would have a material adverse
impact on the Corporation's cash flow and future profitability.
Readers are cautioned that there is increased uncertainty and
higher risk of economic and technical failure associated with such
production decisions.
SOURCE Karora Resources Inc.