American West Metals has entered into a partnership and funding agreement for the development of its 2200-square-kilometre Storm copper project in Nunavut, Canada, which will underpin the project’s long-term future.
The binding heads of agreement with UK-based trading services company Ocean Partners Holdings includes a US$2 million (A$3.32M) private placement, provision of up to 80 per cent of initial capital for project development and Ocean Partners’ offtake of 100 per cent of the project’s copper and silver production.
Ocean Partners offers a complete range of trading services for miners, smelters, refiners, and metal consumers around the world.
The group’s US$2M private placement will see it subscribing to 78,697,462 ordinary shares at an issue price of $0.042 per share, subject to shareholder approval at a general meeting of American West shareholders.
Ocean Partners’ subscription is also subject to American West entering into an offtake agreement to secure 100 per cent of the copper and silver production forecast under American West’s preliminary economic analysis (PEA).
It is also subject to a third party, Taurus Mining Royalty Fund, advancing US$2.8M to American West under a separate September 2024 royalty financing agreement between the two companies.
American West must also raise at least a further US$2M (A$4.65M) through the issue of shares - at an as yet undetermined issue price.
Ocean Partners will also provide up to 80 per cent of the initial capital requirement for Storm’s development, up to a maximum of US$40M (A$66.43M), advanced via a three-year secured loan.
Upon first drawdown of the loan agreement and subject to shareholder approval, American West must also issue Ocean Partners with options to acquire ordinary shares in American West, based on three-year term options equal to US$5M (A$8.3M).
Ocean Partners will also be paid a one-off establishment fee of 2 per cent of the loan in cash or equity. If American West elects to pay the establishment fee in shares, the issue will be subject to shareholder approval.
The loan repayment structure will be matched to cash flows during the project development.
American West and Ocean Partners will also form a strategic alliance to optimise and advance development activities to provide the best outcomes for the project.
American West’s managing director Dave O’Neill said: “This is another significant milestone for Storm and continues to position Storm as the next potential copper mine in Canada, joining other very successful base metal mines in the region… Ocean Partners’ existing partnerships and experience with ore-sorting and direct shipping ore copper products are a natural fit with Storm and will help strengthen and streamline the technical aspects of the processing workflow for the PFS and beyond.”
Other successful base metal mines in the region include the 22-million-tonne Polaris mine, which has 14.1 per cent zinc and 4 per cent lead and the 18Mt Nanisivik mine going 9 per cent zinc and 0.7 per cent lead.
In September last year, American West inked a separate agreement with Taurus subsidiary TMRF Canada for up to US$12.5M (A$20.76M) in a royalty package to support Storm’s development. Under this deal, American West will receive payments when the company achieves specific milestones.
Taurus will advance this month a US$3.5M (A$5.81M) second tranche royalty payment based on the positive Storm PEA results. American West will receive US$2.8M (A$4.65M) and its partner Aston Bay Holdings US$0.7M (A$1.16M) of the second tranche payment.
Funds from the private placement and royalty will be used for exploration and development of the Storm project, including along a 110-kilometre copper belt and drill testing of regional targets such as American Metals’ Blizzard and Tornado prospects.
The company is also working on expanding the known indicated and inferred mineral resource estimate for Storm of 20.6Mt at 1.2 per cent copper and 3.4 grams per tonne (g/t) silver at a 0.35 per cent copper cut-off rate.
Its Cirrus Deeps, Cyclone Deeps, The Gap, Hailstorm, Squall, and other high-grade copper prospects all require further resource definition work that could significantly change the project’s scope.
Pre-feasibility study work will include additional metallurgical testing and process optimisation, geotechnical drilling, project engineering and costing studies.
Storm’s preliminary economic analysis which is based on the current Storm mineral resource estimate demonstrates a technically robust project that has the potential to become a profitable, long-life mine with strong economic returns.
It suggests a 10-year open pit mining and mineral processing facility can be developed at Storm with a low initial capital cost of US$47.4M (A$78.72M) to deliver a project net present value of about US$149M (A$247.47M) and a post-tax internal rate of return (IRR) of about 46 per cent for a three year pay-back.
Shareholder returns could be greatly enhanced using 100 per cent debt to fund development, which would lift the nominal pre-tax IRR to an impressive 135 per cent.
American West owns 80 per cent of the Storm project, with joint venture partner Aston Bay Holdings.
The project has excellent facilities, including a 50-person camp, which can support all the necessary exploration and resource activities.
Less than 5 per cent of the 110km prospective copper horizon at Storm has been systematically explored, far less with any drill testing. Exploration targets have been identified along the copper belt, which means the project holds considerable potential to build additional copper resources.
American West is planning a major exploration program this year that will test a remarkable pipeline of exceptional copper targets.
Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au
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