General Mining Corporation shares fell sharply today after the company announced revised terms for the acquisition of an interest in Galaxy Resources' Mt Cattlin tantalum project near Ravensthorpe.
Under the revised terms of the deal, General Mining will earn a 50 per cent interest in Mt Cattlin by investing $7 million of capital expenditure prior to commencement of production, which is scheduled for the March quarter next year, as well as three annual instalments of $6 million.
General Mining can earn its stake at an earlier date by paying the full amount of $25 million at any time within the first three years.
It will also have the option to earn a 50 per cent interest in Galaxy’s James Bay lithium project in Canada, for $US5 million over a three-year period.
General Mining will become sole operator and manager of the Mt Cattlin project, while revenues after the start of production will be shared equally.
“We believe the revised deal structure with General Mining will allow Galaxy to benefit and unlock more value from both projects over the longer term,” Galaxy chief executive Anthony Tse said.
“The General Mining management team has the depth of experience and technical knowledge, together with their financial commitment, to provide Galaxy with the means to immediately restart the operations at Mt Cattlin and at the same time advance the James Bay project.”
General Mining’s original proposition was to fully acquire the Mt Cattlin project for $30 million and a 3 per cent net smelter return, plus an annual lease fee of $2.5 million and a 10 per cent production royalty.
“The renegotiated deal is a simpler structure and gives the company exposure to a second project in James Bay, as well as an expanded platform at Mt Cattlin,” General Mining director Michael Fotios said.
Galaxy shares were unchanged at 3.7 cents each, while General Mining shares lost 21.4 per cent of their value to 5.5 cents at 1:30pm.