MetalNRG PLC (LON:MNRG) has updated investors regarding the planned acquisition of Lake Victoria Gold (LVG) announced in October.
LVG is the operator of the Imwelo Project in Tanzania which has a total resource of 4.37mln tonnes at 1.92 grammes per tonne based on resource drilling completed in 2016, and a mineral resource estimate in 2017 for a total of 291,600 ounces.
READ: MetalNRG says to redo Imwelo PFS and scoping study when acquisition of Lake Victoria Gold completes
In addition, an open-pit mining pre-feasibility study and underground mining scoping study was completed by Measured Group for the Imwelo Project in June 2017, the firm said.
The latter considered a conventional drill and blast, load and haul open-pit mining operation based on mining open-pit reserves of 1.362mln tonnes at 2.22 grammes per tonne of gold for a total of 87,660 ounces of gold recovered over four years, based on a gold price of US$1,250 per ounce.
The scoping study considered a transition from open-pit mining to underground mining, the natural resource investing and exploration company noted.
One of the areas the study relies on includes resources from PML 2637, which LVG has an option agreement to acquire for US$50,000.
The counterparty to LVG for the option agreement has died and the family members who inherited the option agreement have been contacted and negotiations are underway to agree on similar terms, however this will take some time, MetalNRG added.
As a result, both parties have agreed to remove all reference to the mineral resources associated with PM 2637 from the proposed transaction, this amounts to a 90,000 ounces reduction in contained gold and enter into a variation agreement to the Bid Implementation agreement that was signed on October 19, 2020.
The variation agreement outlines the varied terms of the bid implementation agreement that the two companies have signed up to, under which the total number of MetalNRG shares as potential consideration will remain at 750mln, but will be transferred in two tranches and MetalNRG will withhold 34mln MetalNRG shares for a period of six months from the total possible consideration.
The first tranche of MetalNRG shares is transferable upon acceptance, by the LVG shareholders, of the proposed bid and the transfer of 100% of the LVG shares to MetalNRG, the second tranche of MetalNRG shares is transferable upon completion and the successful update of the PFS and achieving specific milestones with regards to NPV of the project, the firm said.
Under the terms of the variation agreement, upon acceptance of the transaction by LVG shareholders and the transfer of 100% of the LVG shares to MetalNRG, MetalNRG will release 500mln MetalNRG shares to LVG shareholders as the first tranche transfer, for a value of 0.8p each.
The parties have agreed that a second tranche of MetalNRG shares will be released post revision of the study by the Measured Group and MetalNRG releasing a regulatory news release with the update to market of the results of the revised 2021 study outlining the net present value of the project.
The maximum amount of MetalNRG shares that can be transferred in the second tranche is 215mln at a price which cannot be below 0.8p and which can be higher if the then MetalNRG share price closes higher on the day before the announcement to market is made.
It is further agreed that LVG investors will be allocated one MetalNRG Board position as opposed to the two board positions originally anticipated on acceptance of the transaction by LVG shareholders, the investor said.
A second board appointment for a non-executive director representing LVG shareholders will be allocated upon completion of the 2021 study.
MetalNRG is committed to working towards achieving production from the LVG assets within a 10-to-12-month period from the closure of the transaction with LVG.
“We continue to be satisfied that the business opportunity from the LVG transaction remains valid for MetalNRG and that the questions around the option agreement on PML 2637 will be resolved in the new year,” said chief executive Rolf Gerritsen in a release.
“We are pleased that the LVG Board has recognised the situation and worked with us to find a suitable commercial solution to the changes and look forward to working with LVG on completion.”
