Classic Minerals has attracted the interest of global investment group LDA Capital who will provide a $15m equity line over the next three years for Classic to develop its 93,000 ounce high grade Kat Gap gold deposit in WA’s Southern Cross region. The company has also locked away a $5m con-note to turbo-charge the funding options for Kat Gap and its greater Forrestania project area.
The significant funding boost will be used to complete the company’s phase one production ramp up at Kat Gap that boasts and excellent grade of 2.96 grams per tonne gold. Classic will also use the money to add ounces to its other projects within the Forrestania gold belt including Lady Ada that has 59,700 ounces locked away currently and Lady Magdalene that is already well endowed with just over 250,000 ounces in-ground.
Under the agreed terms of the deal with LDA, Classic will be able to draw down up to $15 million at its own discretion over the next three years by exercising put options to the investment group. The issues shares will be priced at 90% of the higher of the average volume weighted average price in the 30-trading day period prior to the issue of the put option and the “minimum acceptable price” notified to LDA Capital by the Company in the put option notice – although the company did not specify how that minimum price will be calculated.
Classic will also issue LDA with 59,614,678 options with a strike price of just under 1.4c that will expire in three years – potentially giving it another significant source of funding along the way as it catapults Kat Gap into production.
LDA is no stranger to doing deals either. The company says it has executed 250 transactions over time across 43 countries for a total of US$11b.
The $5m con-note deal is with Perth based Still Capital that is run by businessman Chris Whitehead.
That deal will see up to $5.5m ploughed into Classic with $5.1m already in the bag. Con note holders will be able to convert their notes to Classic shares over the next 18 months at their discretion at the lesser of a 20 per cent discount to the 15 day VWAP at the time of conversion and 1.7c.
Still Capital will also pick up 30,000,000 options under the deal excisable at 2.5c before December 1st 2025 – a price considerably above the current market price of just under 1 cent.
Classic Minerals Chairman, John Lester said: “This is the strongest signal yet that the Kat Gap resource has moved from rural Western Australia onto the world stage where substantial, credible, and internationally renowned investors are comfortable enough to invest in Classic Minerals Limited.”
Classic’s Kat Gap project sits 170km south of Southern Cross and hosts a mineral resource of of 975,722 tonnes at 2.96 grams per tonne for almost 93,000 ounces of gold. The project is the highest-grade contributor to the company’s total gold inventory of 403,906 ounces.
Classic has been steadily building towards production at its flagship site over the past six months and received final approval just last month from the state regulator. In preparation for production, the company has already been given the go-ahead for an account with the Perth Mint to facilitate early gold sales.
In its recent pilot work it achieved a high gold recovery at a relatively coarse grind size and management believes the low energy requirement of a coarse grind will also work to minimise greenhouse gases and operating costs.
Back in October Classic entered into a non-binding memorandum of understanding with private company Barto Gold Mining for the toll treatment of ore from Kat Gap. Barto is the owner of the Southern Cross Gold Operation centred around Marvel Loch about 30km south of Southern Cross. Its milling operation is about 130km north of Kat Gap and is capable of processing 1 million tonnes per annum with all the associated infrastructure in place for a successful gold production operation. The agreement follows Classic’s term sheet with another private company, Goldvalley Brown Stone, for $10 million in non-recourse funding to facilitate the extraction and processing of its ore. The company says it has been working with Goldvalley towards the finalisation of the mining and logistics required to extract up to 50,000 ounces from the deposit initially. The term sheet will see the pair share the net profits from gold production at Kat Gap 70/30 in favour of Classic.
Classic has long touted the advantages of its Kat Gap gold resource including its excellent grades and relatively shallow geology, however funding has always been a bug bear for the small capped company.
All of those funding issues drop away now with the signing of the LDA equity line and the $5.1m con-note.
Classic will now have the opportunity to prove its theory about the imminent mineability and profitability of Kat Gap and along the way just might become self funding as it seeks to add more ounces to its already 400,000 ounce strong gold inventory in the greater Forrestania region.
With Classic currently trading at just under 1 cent, the options issued to both LDA with a strike of 1.4c and then Still Capital at 2.5c also should not be underestimated as a runway of funding – and potentially just when the company will need it.
With funding no longer a problem, Classic will now get to strut its stuff in an area that it is much more familiar with – mining – watch this space.
Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au
By Matt Birney
