Barsele Minerals Corp. (BME:TSX.V) just announced that it has signed a nonbinding letter of intent to acquire Agnico Eagle's 55% indirect share of the Barsele project located in northern Sweden. Barsele already controls 45% of the project.
The project is located at the western end of the Proterozoic Skellefte Trend, a volcanogenic massive sulphide deposit belt, that host polymetallic and orogenic gold deposits.
"The opportunity to acquire a 100% controlling interest in the Barsele Project represents a tremendous milestone for Barsele," said Gary Cope, president, CEO and a director of Barsele, commented. "We plan to significantly increase the drilling activity on the project with the goal of growing the current mineral resource estimates. We are excited to start a new chapter in the development of the Barsele Project and are thankful to our joint venture partner Agnico Eagle for the work we have completed together. We now look forward to having Agnico Eagle as our largest shareholder."
Through the terms of the agreement, Barsele will acquire Agnico Eagle's 55% indirect interest in Gunnarn Mining AB, which holds the Barsele Project, for a payment of US$45 million, the issuance of shares so that Agnico Eagle will hold 14.9% of Barsele's common shares, warrants exercisable for 6 million Barsele common shares, a 2% net smelter returns (NSR) royalty, and a contingent value right (CRV) on "future gold mineral reserves and mineral resources identified at the Barsele Project." Barsele can purchase 1% of the NSR royalty for US$15 million.
The company noted that there is an "existing 2.0% net smelter return royalty on the Barsele Project pursuant to an agreement dated June 11, 2015 between Orex Minerals Inc., Gunnarn Mining AB, Agnico Eagle Sweden AB and Agnico Eagle, which includes a repurchase right for US$5,000,000. The LOI anticipates that the Existing NSR, including the repurchase right, will be assigned and assumed by Barsele at closing of the Proposed Transaction."
The warrants will have a term of five years and an exercise price of CA$1.25 a share, or a 20% premium to the 20-day volume weighted average of Barsele common shares, or the conversion price of convertible debt if Barsele issues convertible debt as part of the financing of the cash amount of the sale.
On the contingent value right, Barsele agrees to pay Agnico Eagle US$2.5 million for each additional 1 million ounces of gold mineral reserves and resources identified at the project above the current reserves and reserves, capped at a maximum of US$20 million. These funds won't be payable until there is a construction decision at Barsele, change of control or the tenth anniversary of the closing of the transaction. Barsele "may satisfy the first US$5,000,000 of any future CVR payments by applying such amount to the repurchase of the Existing NSR rather than payment of the CVR," the release stated.
Agnico Eagle will also be granted a participation right in certain future financings so that it can maintain its pro rata or 14.9% interest in Barsele.
Barsele stated that it intends to fund either all or a part of the cash amount of the transaction through issuing debt or equity.
The companies have established an exclusivity period that ends July 30, 2021, "with a view to settling the definitive documentation for the Proposed Transaction by such date."
"We see Barsele's consolidation of the Barsele Project as a positive outcome for all stakeholders," stated Sean Boyd, Agnico Eagle's CEO. "The monetization of our interest in the Barsele Project will allow Agnico Eagle to focus on the most advanced projects in our exploration and development pipeline, while retaining an interest in the Barsele Project as a significant equity investor and royalty holder. We wish Barsele success as they undertake the next phase of exploration at the project and are confident that they have the required skill set to continue to advance the project."
A resource estimate released in February 2019 calculated the resource to be 324,000 ounces of gold in the Indicated category and 2.086 million ounces of gold in the Inferred category.
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