Alt Resources (ASX: ARS) will wholly-own the Bottle Creek gold asset ahead of its final payment date after it executed a $4.5 million funding package.
The package is via a partially redeemable convertible note deed with Collins Street Value Fund, with Alt to use the funds to make the final payment for Bottle Creek well ahead of the November 2020 deadline.
“We are extremely pleased to have attracted funding to secure the Bottle Creek mining project,” Alt executive director Andrew Sparke said.
“This asset is the backbone of the company’s resource base and is pivotal to the company’s mining ambitions,” he added.
Bottle Creek has two mining leases and hosts the VB and Boags open pits and a resource of 5.6 million tonnes at 1.72g/t gold for 309,000 ounces of gold and 3.78Moz of silver.
Between 1988 and 1989, Rio Tinto subsidiary Norgold Ltd mined VB and Boags open pits on the leases and produced 93,000oz gold.
The average gold grade at VB was 3.26g/t, while VB’s average grade was 2.65g/t.
Norgold processed the ore at a carbon-in-pulp plant. Although the plant was removed, other infrastructure remains on site including tailing storage facilities, a fully functioning exploration camp, along with potable water and communication services.
Undervalued gold company
The mining leases form part of Alt’s wider 360 square kilometre Mt Ida project that is about 90km north-west of Menzies in Western Australia.
Earlier this year, Orior Capital analyst Simon Francis gave Alt a $0.08 per share valuation – claiming Alt was “compellingly cheap” with a multi-million gold ounce opportunity.
Mt Ida hosts global resources of 6.8Mt at 1.82g/t gold for 406,000oz.
In his report, Mr Francis pointed out the area remains under-explored with the current resource based on just 3.8km of a known 11km mineralised trend.
A scoping study at the project has confirmed Mt Ida’s potential for a “robust” and “low cost” open pit gold operation.
Underpinning the study were Bottle Creek, Quinn’s and Mt Ida South tenements.
The study estimates capital expenditure of $30 million would be required to develop an initial six-year 500,000tpa operation that would produce 181,200 ounces of gold and 937,800oz silver.
It is expected the operation would become cashflow positive within the first year and generate earnings before interest tax depreciation and amortisation of $102.2 million over the first six years – based on estimated all in sustaining costs of A$1,100-A$1,200/oz.
Alt’s chief executive officer James Anderson pointed out the project had “clear potential” for “significantly” increased cashflow by expanding the mine life.
The company plans to do this via ongoing exploration and potential acquisitions.
An updated resource is expected in the coming months.
Attractive funding terms
Mr Sparke said the convertible note had been secured at “very attractive terms” for Alt.
Collins Street Value Fund will subscribe for notes with a face value of $5.4 million and pay $4.5 million to Alt.
The difference is equivalent to 10% per annum in interest over 24 months. Alt has retained the right to pay back half of the notes within 12 months of receiving the funds.
Additionally, Collins Street Value Fund may convert up to half of the notes into Alt shares at $0.032 each within 12 months.
“The conversion price of the notes represents a 47% premium to the five day volume weighted average price of the company’s current share price prior to today’s announcement,” Mr Sparke said.
According to Mr Sparke, the company can pay back 50% of the notes from proceeds of a proposed toll treatment operation at the Tim’s Find tenements.
Alt plans to begin this operation in the first quarter of next year.
“This will ensure that we minimise equity dilution and maximise returns for Alt’s shareholders,” Mr Sparke explained.
“This financing is a strong endorsement of the results we have achieved, and the inherent value investors see in Alt,” he added.
Alt’s shares were steady at $0.024 by late morning.