Minerals 260 (ASX: MI6) has signed a $220 million strategic funding package with Canada’s Franco-Nevada Corporation to accelerate and de-risk the development of its flagship Bullabulling gold project in Western Australia.
The agreement – which represents Franco-Nevada’s largest ever investment in Australia – follows a period of extensive due diligence on the Bullabulling resource, metallurgy, hydrology, project development, and permitting.
It also marks a transformational step forward for Minerals 260, allowing it to secure significant funds ahead of the completion of a pre-feasibility study and declaration of a maiden ore reserve in July, while also de-risking the outlook for future project financing.
Increased Bullabulling Royalty
Under the terms of the investment, Franco-Nevada’s wholly owned subsidiary Franco-Nevada Australia will pay Minerals 260 $170 million in exchange for increasing its royalty on Bullabulling gold production from 1% to 2.45%.
This will comprise $75 million upfront and $95 million payable upon Franco-Nevada obtaining Foreign Investment Review Board approval to take security over the Bullabulling tenements.
The royalty will be subject to a stepped-down rate of 1.63% after cumulative production from the tenements containing the resource, plus any additional tenements within a 2.5 kilometre zone, reaches 4 million ounces.
Franco-Nevada will also invest $50 million in Minerals 260 by subscribing for 111.11 fully paid ordinary shares priced at $0.45 each, representing a 7% premium to the company’s last closing price and a 6% premium to the 10-day volume weighted average price.
On completion of the investment, Franco-Nevada will hold 4.9% equity in Minerals 260.
Accelerated Production
“This milestone will allow us to accelerate this project towards production, expand our exploration strategy, and de-risk our funding pathway,” managing director Luke McFadyen said, describing the funding as a “major endorsement” of the Bullabulling project.
“Franco-Nevada is an existing royalty holder and expanding our relationship with this financing is highly value-accretive relative to other available funding options.”
He said extensive due diligence by the gold-focused royalty and streaming company had validated Bullabulling as ++one of the nation’s leading gold projects++.
Minerals 260 will use the funding to fast-track the construction of an initial 400-room accommodation village at Bullabulling, as well as to procure long-lead items, commence site early works and definitive feasibility study (DFS) activities, and conduct drilling to convert more resource ounces into reserves.
Mr McFadyen said the company would expand a planned 30,000 metre drilling campaign following signing of the deal to support an update to the current mineral resource estimate of 130 million tonnes at 1 gram per tonne gold for 4.5Moz for incorporation into the DFS.
