Wheaton Precious Metals Announces the Acquisition of a Gold Stream from Allied Gold's Kurmuk Project
PR Newswire
VANCOUVER, BC, Dec. 5, 2024
VANCOUVER, BC, Dec. 5, 2024 /PRNewswire/ - Wheaton Precious Metals$(TM)$ Corp. ("Wheaton" or the "Company") is pleased to announce that its wholly-owned subsidiary, Wheaton Precious Metals International Ltd. ("WPMI") has entered into a definitive Precious Metals Purchase Agreement (the "Gold Stream") with Allied Gold Corporation and its wholly owned subsidiary Allied Gold Services Inc. (together, "Allied"), in respect of the Kurmuk Project located in Ethiopia (the "Project" or "Kurmuk").
"Wheaton is pleased to announce a streaming agreement with Allied to advance the construction of the Kurmuk project, which is set to be the first commercial gold mine in Ethiopia," said Randy Smallwood, President and CEO of Wheaton Precious Metals. "This fully permitted, high quality development project offers significant exploration potential, supported by a team at Allied with a proven operating track record. We are excited to partner with Allied to unlock opportunities that empower the local communities and help drive the growth of Ethiopia's emerging metals and mining sector."
"We are delighted to partner with Wheaton on this streaming financing. This began as a multi-party process although it soon became apparent to us that Wheaton would be our partner of choice. They conducted detailed and extensive diligence, were supportive of our efforts, worked with us in evaluating and considering optimization opportunities and recognized the inherent value of our Kurmuk project, a value that we believe significantly exceeds the value implied in our share price. We take our sustainability programs seriously, and it was a delight to see Wheaton not only support these programs but provide suggested improvements. We also welcome Wheaton as a shareholder with a share position acquired in Allied's recent overnight marketed equity financing." commented Peter Marrone, Chairman and CEO of Allied Gold Corporation. "The stream financing now allows us to complete the gold prepay which is the final component of our planned comprehensive financing package for the development of the Kurmuk project. The gold prepay is expected to be led by the lending syndicate for Allied's revolving credit facility, with proceeds available to Allied following the completion of the stream financing. We expect the Kurmuk mine will become one of the more significant precious metal mines in the world delivering significant production and cash flow following its construction."
Transaction Key Terms
(All values in US$ unless otherwise noted)
-- Gold Stream Upfront Consideration: WPMI will pay Allied total upfront cash consideration of US$175 million (the "Deposit") in four equal installment payments during construction, subject to certain customary conditions. -- Streamed Metal: WPMI will purchase 6.7% of the payable gold until a total of 220 thousand ounces ("Koz") of gold has been delivered, at which point WPMI will purchase 4.8% of the payable gold for the life of mine. During any period in which debt exceeding US$150 million ranks ahead of the Gold Stream, the stream percentage increases to 7.15% and decreases to 5.25% once the drop-down threshold is reached. Payable gold is calculated using a fixed payable factor of 99.95%. -- Production Profile1: Attributable Gold Stream production is forecast to average over 16 Koz of gold per year for the first ten years of production. The Project is forecast to have an 11-year mine life based on reserves alone with additional upside from resources and significant exploration potential. First production is anticipated in mid-2026. -- Production Payments: WPMI will make ongoing payments for the gold ounces delivered equal to 15% of the spot price of gold -- Incremental Reserves and Resources1: The addition of the Kurmuk Project will increase Wheaton's total estimated Proven and Probable Mineral gold reserves by 0.18 million ounces ("Moz"), Measured and Indicated Mineral gold resources by 0.03 Moz and Inferred gold resources by 0.02 Moz. -- Other Considerations: -- The Gold Stream will include a customary completion test based on expected gold production and expected mining rates. -- WPMI has obtained a right of first refusal on any future precious metal streams, royalties, prepays or similar transactions relative to the Kurmuk Project. -- In the event of a change of control prior to the earlier of completion and January 1, 2027, Allied will have an option to buyback one third of the stream. -- The Gold Stream will cover the existing mining license for the Kurmuk Project and until 255Koz of payable gold are delivered to WPMI, an additional 50km radius around the mining license. -- Allied and certain subsidiaries will provide WPMI with corporate guarantees and certain other security. Other Allied subsidiaries will provide guarantees and security in respect of the Sadiola Mine pending the delivery of certain Kurmuk related security -- Allied is expected to comply in all material respects with the International Finance Corporation's Performance Standards on Environmental and Social Sustainability, the Voluntary Principles on Security and Human Rights, the Global Industry Standard on Tailings Management, and WPMI's Partner/Supplier Code of Conduct, which outlines Wheaton's expectations in regard to environmental, social and governance ("ESG") matters. -- The Company participated in Allied's equity financing completed on October 18, 2024 in the amount of C$20.15 million, with gross proceeds totalling C$221 million.
Financing the Transactions
As at September 30, 2024, the Company had approximately $694 million of cash on hand and believes that when combined with the liquidity provided by the available credit under the $2 billion revolving term loan and ongoing operating cash flows, WPMI is well positioned to fund the acquisition of the Gold Stream as well as all outstanding commitments and known contingencies and provides flexibility to acquire additional accretive mineral stream interests.
About Allied and the Kurmuk Project
Allied Gold Corporation (TSX: AAUC, OTCQX: AAUCF) is an international gold mining company with a diversified portfolio of long-life assets that have significant near-term growth upside.
The Kurmuk Project is an advanced stage development project in the Benishangul-Gumuz region of Ethiopia. The project involves a two-phase development plan requiring a total capital investment of approximately $500 million. The initial phase of early works was completed mid-2024, and Allied anticipates capital expenditures to reach approximately $100 million in 2024. Construction activities are progressing well to date and the project remains on schedule with production expected to begin by the second quarter of 2026. The project aims to achieve an average annual gold production of approximately 270Koz over the first five years and sustain an average of over 240Koz annually over a 10-year mine life, at All-in sustaining costs of approximately $1000 per ounce. The current project design encompasses the Dish Mountain and Ashashire deposits, with numerous exploration targets across the Kurmuk Project's expansive 1,450 km(2) exploration territory.
Attributable Gold Mineral Reserves and Mineral Resources -- Kurmuk Project
Tonnage Contained Category Mt Grade Au g/t Au Moz ---------- ------- ------------ --------- Proven 1.5 1.51 0.07 ---------- ------- ------------ --------- Probable 2.6 1.35 0.11 ---------- ------- ------------ --------- P&P 4.1 1.41 0.18 ---------- ------- ------------ --------- Measured 0.2 1.30 0.01 ---------- ------- ------------ --------- Indicated 0.5 1.35 0.02 ---------- ------- ------------ --------- M&I 0.6 1.34 0.03 ---------- ------- ------------ --------- Inferred 0.4 1.62 0.02 ---------- ------- ------------ ---------
Notes on Mineral Reserves & Mineral Resources:
1. All Mineral Reserves and Mineral Resources have been estimated in accordance with the 2014 Canadian Institute of Mining, Metallurgy and Petroleum $(CIM)$ Standards for Mineral Resources and Mineral Reserves and National Instrument 43-101 -- Standards for Disclosure for Mineral Projects ("NI 43-101"). 2. Mineral Reserves and Mineral Resources are reported above in millions of metric tonnes ("Mt"), grams per metric tonne ("g/t") and millions of ounces ("Moz"). 3. Qualified persons ("QPs"), as defined by the NI 43-101, for the technical information contained in this document (including the Mineral Reserve and Mineral Resource estimates) are: a. Neil Burns, M.Sc., P.Geo. (Vice President, Technical Services); and b. Ryan Ulansky, M.A.Sc., P.Eng. (Vice President, Engineering), both employees of the Company (the "Company's QPs"). 4. The Mineral Resources reported in the above tables are exclusive of Mineral Reserves. 5. Mineral Resources, which are not Mineral Reserves, do not have demonstrated economic viability. 6. Kurmuk Project Mineral Reserves and Mineral Resources are reported as of December 31, 2023. 7. Kurmuk Project Mineral Reserves are reported above gold grade cut-offs ranging from 0.30 to 0.45 grams per tonne assuming $1,500 per ounce gold.
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