Sandstorm Gold has announced that Luna Gold and JDL Gold have signed an agreement to merge their businesses, a move that will create a multi-asset mining company.
Under the agreement, JDL will buy all of the outstanding shares of Luna Gold as per the plan of arrangement. This merged entity will take the name of Trek Mining.
Christian Milau from Luna Gold will serve as CEO and executive director of Trek Mining and Greg Smith from JDL as president and executive director.
Trek Mining will be funded with around $50m in cash and will have no cash debt.
This firm is expected to be strongly positioned to further Luna Gold’s Aurizona gold project to production.
Sandstorm has a 3% to 5% sliding scale net smelter returns (NSR) royalty on Aurizona, in addition to gold prices around $1,500 per ounce, with the royalty being a 3% of NSR.
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The deal is also expected to speed-up exploration at Aurizona with a focus on the drill-ready targets directly along strike of the existing reserves and resources at the Piaba open pit.
As well as the sliding scale royalty on Aurizona, Sandstorm also holds a 2% NSR royalty on greenfields properties owned by Luna Gold.
The greenfields exploration ground is located close to the Aurizona Project and is under option to AngloGold Ashanti Holdings (AngloGold).
Upon completion of the deal, the term debt facility due from Luna to Sandstorm of $20m in addition to accrued interest will be settled in equity or a combination of cash and equity of Trek Mining.
Sandstorm will continue to have $30m convertible debt facility, which is due from Luna.
Sandstorm president and CEO Nolan Watson said: “As a material stakeholder in Luna, we are pleased with the proposed merger between Luna Gold and JDL and we fully support the proposal.
“Trek will be a well-capitalised company with a strong management team and we expect to see the Aurizona Project take meaningful steps toward production.”
The Aurizona Project is located in north-eastern Brazil and produced gold from 2010 until late-2015 when it was placed on care and maintenance.
This project produced a total of 329,042oz of gold at an average grade of 1.28g/t and had average recoveries of 88%.
Remaining proven and probable reserves are estimated at 18.6 million tonnes at 1.62g/t for 969,000oz of gold, with measured and indicated resources (inclusive of reserves) of 29.9 million tonnes at 1.67g/t for 1,599,400oz of gold.
Image: The Aurizona Project produced a total of 329,042 ounces of gold. Photo: courtesy of Andrea Poppi/Freeimages.com.