Classic Minerals finances Kat Gap gold project, avoids shareholder dilution
Classic chairman John Lester says the agreement with Goldvalley enables the company to retain control of the project and “ensure greatest shareholder benefits”.
Classic Minerals (ASX: CLZ) has secured $10 million in financing for its Kat Gap gold project in Western Australia, sharing the net profits from gold sales with the financier rather than diluting existing shareholders through a large new stock issue.
Perth-based Goldvalley Brown Stone, headed by Yuzheng Kie, invests in mining, agriculture and energy.
Goldvalley has agreed to provide up to $10 million in non-recourse funding to Classic. In return, it will receive a 30% slice of the net profits from gold sales, with Classic retaining 70% of that revenue.
Kat Gap contains a shallow unmined gold deposit located 170km south of Southern Cross. It was discovered in the 1990s and then the subject of a scoping study in 2003 by the former Sons of Gwalia, which was once the third largest gold producer in Australia until its collapse in 2004.
Classic has previously described the gold mineralisation at Kat Gap as “impressive with exceptional shallow high-grade gold in its drill holes”. Its current resource stands at a contained 93,000 ounces of gold.
Fast-track with strong grades, near-surface mineralisation
The financing is unsecured and non-recourse, meaning it can be repaid only from revenues at Kat Gap.
Under the terms of the agreement, Goldvalley will enter a binding agreement with the owner of a gold mill to toll treat ore from Kat Gap, with those details to be announced after due diligence has been completed.
Goldvalley will provide financing for sequential ore treatment parcels of 100,000 tonnes. the
Revenues generated from this will be available for further ore treatment until a production cap of 500,000t (with a minimum average grade of 2.85 grams per tonne) has been mined and processed.
This process is expected to be completed by mid-2024.
Classic says the strong grades and near surface mineralisation allow the option to fast-track Kat Gap to early production.
Deal will ensure keeping control of project
Classic chairman John Lester said it always been the company’s strategy to retain control of the project and ensure greatest benefits for shareholders
The deal with Goldvalley has made this possible.
“Classic is provided with a low capital way forward whilst retaining a solid proportion of the profits and avoiding dilution,” Mr Lester added.
Kat Gap is located 50km south of Classic’s Forrestania gold project.
Forrestania contains an existing mineral resource of 5.9Mt at 1.25g/t for a contained 240,000oz.The Forrestania assets include a high-grade open pit previously mined by Sons of Gwalia in the early 2000s.