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Sarama Resources Ltd
Symbol SWA
Shares Issued 87,152,260
Close 2014-11-26 C$ 0.04
Market Cap C$ 3,486,090
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Sarama to option up to 75% of South Hounde to Acacia

2014-11-27 08:11 ET - News Release

Mr. Andrew Dinning reports

SARAMA RESOURCES AND ACACIA MINING (FORMERLY AFRICAN BARRICK GOLD) ENTER INTO EARN-IN ARRANGEMENT IN BURKINA FASO

Sarama Resources Ltd. has entered into an agreement with Acacia Mining PLC formerly known as African Barrick Gold PLC) relating to Sarama's South Hounde project in Burkina Faso, whereby Acacia will have the option to earn up to a 70-per-cent interest in the project by satisfying certain conditions over a four-year earn-in period and then the right to acquire an additional 5-per-cent interest, for a total 75-per-cent interest in the project, upon declaration of a minimum mineral reserve.

Highlights:

  • Key commercial terms of the agreement are as follows:
    • Acacia makes a cash payment of $1-million (U.S.) to Sarama upon completion.
    • Acacia will earn a 50-per-cent interest in the project upon the expenditure of $7-million (U.S.) by the end of year 2.
    • Acacia will earn an additional 20-per-cent interest, for a total 70-per-cent interest in the project, upon the expenditure of a further $7-million (U.S.) by the end of year 4.
    • Upon Acacia acquiring a 70-per-cent interest in the project, Sarama and Acacia will advance the project under a joint venture arrangement with both parties financing the venture according to their proportionate interests.
    • Upon attaining a 70-per-cent interest in the project, Acacia will have the right to acquire an additional 5-per-cent interest, for a total 75-per-cent interest in the project, upon the declaration of a mineral reserve of at least 1.6 million ounces of gold.
  • The arrangement provides financing to build upon the existing 1.5-million-ounce mineral resource and advance the project to the next stage of development.
  • Sarama remains an active explorer in Burkina Faso and will independently pursue its other exploration interests in the Hounde belt and the country.

Sarama's president and chief executive officer, Andrew Dinning, commented: "Sarama is pleased to have entered into this arrangement with Acacia Mining (formerly known as African Barrick Gold) who from a strong operational base in Tanzania, is seeking to fulfill its growth aspirations. Acacia's decision to gain exposure to West Africa and Burkina Faso via this arrangement endorses Sarama's exploration and technical work to date and supports the company's belief that the South Hounde project has significant potential to build upon the current mineral resource.

"Importantly, partnering with Acacia will allow exploration of the project to continue, with a view of creating value for the partners. This is an excellent outcome for Sarama shareholders at a time where additional equity financing would result in significant dilution."

The agreement is structured with an initial earn-in phase by Acacia, converting to a joint venture phase subject to Acacia meeting certain milestones and conditions. Additional commercial terms, include the following:

  • If Acacia does not incur expenditure of at least $3.5-million (U.S.) in year 1, the agreement will terminate and Sarama will retain a 100-per-cent interest in the project.
  • If Acacia incurs expenditure of at least $3.5-million (U.S.) in year 1, but does not incur expenditure of at least $5-million (U.S.) by the end of year 2, the agreement will terminate and Sarama will retain a 100-per-cent interest in the project.
  • If Acacia incurs expenditure of at least $3.5-million (U.S.) in year 1, but only incurs a minimum expenditure of $5-million (U.S.) by the end of year 2, Acacia will earn a 25-per-cent interest in the project, the earn-in phase will terminate and Sarama and Acacia will advance the project under a joint venture arrangement with both parties financing the venture according to their proportionate interests. In that event, Sarama will have the right to acquire Acacia's interest in the project by making a payment equivalent to 1.5 times Acacia's total expenditure to the time of exercise of this right.
  • If Acacia earns a 50-per-cent interest in the project, but does not incur expenditure of at least $3.5-million (U.S.) in the ensuing one-year period, Acacia will remain at a 50-per-cent interest in the project, the earn-in phase will terminate and Sarama and Acacia will advance the project under a joint venture arrangement with both parties financing the venture according to their proportionate interests.
  • If Acacia earns a 50-per-cent interest in the project and incurs expenditure of at least $3.5-million (U.S.) in the ensuing one-year period, but does not incur total expenditure of at least $7-million (U.S.) in the two-year period after acquiring the 50-per-cent interest, Acacia will remain at a 50-per-cent interest in the project, the earn-in phase will terminate and Sarama and Acacia will advance the project under a joint venture arrangement with both parties financing the venture according to their proportionate interests.
  • If Sarama and Acacia, while operating under a joint venture arrangement after Acacia has earned a 70-per-cent interest in the project, are successful in declaring a mineral reserve of at least 1.6 million ounces gold in accordance with National Instrument 43-101, Acacia will acquire an additional 5-per-cent interest in the project, upon payment to Sarama of an amount equal to 5 per cent of the expenditure incurred by the parties from the time that Acacia earned its 70-per-cent interest in the project to the declaration of the mineral reserve.
  • Any joint venture arrangement between Sarama and Acacia will contain usual dilution provisions. If while Sarama and Acacia are operating under a joint venture arrangement either party's interest is diluted to less than 10 per cent, its interest will convert to a net smelter return royalty as follows:
    • In the case of Sarama, a 2-per-cent NSR royalty. Acacia will have the right to reduce the royalty to a 1-per-cent NSR royalty upon payment of $3-million (U.S.) to Sarama within 90 days of conversion;
    • In the case of Acacia, a 1-per-cent NSR royalty, capped at 1.2 million ounces of gold produced.

In either case, the royalty will become payable upon the earlier of: (i) completion of two years of commercial production; or (ii) production of 400,000 ounces of gold from the project after conversion.

Sarama will continue to act as the operator of the project, and subject to certain conditions, will remain the operator of the project unless and until Acacia exercises its right to assume the role of operator after earning a 50-per-cent interest in the project.

The agreement is subject to the satisfaction of conditions to completion that are usual in an agreement of this nature. The TSX Venture Exchange has provided conditional approval of the agreement, on usual conditions.

Qualified person's statement

Scientific or technical information in this news release that relates to the preparation of the company's mineral resource estimate is based on information compiled or approved by Adrian Shepherd. Mr. Shepherd is an employee of Cube Consulting Pty. Ltd. and is considered to be independent of Sarama Resources. Mr. Shepherd is a chartered professional member in good standing of the Australasian Institute of Mining and Metallurgy, and has sufficient experience which is relevant to the commodity, style of mineralization under consideration and activity which he is undertaking to qualify as a qualified person under National Instrument 43-101. Mr. Shepherd consents to the inclusion in this news release of the information in the form and context in which it appears.

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