Kerr Mines (TSX: KER; US-OTC: KERMF) has agreed to a US$27.6 million prepaid forward gold financing with Pandion Mine Finance to fund its past producing Copperstone gold mine in Arizona through development and into production.
Kerr will sell Pandion 95,000 oz. gold at spot price less a discount within 40 months. It says it will not deliver Pandion any gold during the deal’s first 22 months.
Pandion will finance Kerr in two tranches. The US$19.6 million first tranche will close in August; the US$8 million second tranche will close July 2019.
Copperstone produced nearly half a million oz. gold between 1987 and 1993. The open pit mine still has lots of infrastructure, including a power line and substation, three water wells, offices and a tailings facility, processing facility and mill. It is fully permitted.
According to an April 2018 pre-feasibility study, Kerr needs US$22.7 million in initial capital to revive the project, which it would pay back in 2.27 years. The project has a US$17.91 million after-tax net present value at a 10% discount rate and a 40.1% after-tax internal rate of return.
The project contains 802,000 proven and probable tonnes grading 6.69 grams gold per tonne for 175,100 oz. gold.
The project also contains 1.12 million measured and indicated tonnes grading 7.63 grams gold for 276,100 oz. gold and 666,000 inferred tonnes at 6.81 grams gold for 145,700 oz. gold.
The company expects to mine 1.28 million tonnes over 4.4 years. After a one year 92,000 tonne ramp up, the company expects to mine 410,000 tonnes in year one and then less each subsequent year, mining just 11,700 tonnes in year five.
Shares of Kerr Mines are currently trading at 22¢ with a 52-week range of 19¢ to 41¢. The company has a $55 million market capitalization.
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