Montan Mining Corp. (TSX-V: MNY; FSE: S5GM; SSE: MNYC) has entered into a binding term sheet (Term Sheet) with Cartesian Royalty Holdings Pte. Ltd. (CRH) for a financing package of up to US $10 million (all figures in US dollars) to fund the acquisition of Kairos Capital Peru S.A.C. and M&S Transportes y Servicios Generales S.R.L, including the Mirador processing plant, as announced on February 16, 2017; and to bring Montan’s 100%-owned Cerro Dorado gold processing plant into full commercial production and increase its capacity.
Cartesian Royalty Holdings Pte. Ltd. is an affiliate of Cartesian Capital Group, LLC, a global private equity firm with proven expertise in assisting closely-held companies develop into global market leaders. Cartesian Capital Group manages more than $2.4 billion in capital and has offices in New York, Sao Paulo, Shanghai, Warsaw, and Bermuda.
The Term Sheet provides that CRH will invest in three tranches, each with a specified use of proceeds, as well as additional tranches at the discretion of CRH. Each tranche will be structured in a 25% equity/75% stream ratio.
Streaming Investment Terms: For each $1.0 million in streaming investment, CRH is to receive 2,500 ounces of gold or gold equivalent from Montan, payable over a maximum of 50 months from closing. Repayment of each streaming investment is to commence six months after drawdown over a repayment period of 42-months, subject to two months of optional payment holidays whereby Montan can defer its monthly payment. Each exercised payment holiday must be separated by at least 6 months.
Equity Investment Terms: The Montan units are priced at a 20% discount to the VWAP of Montan common shares for the 30-day calendar day period immediately preceding the Term Sheet; each unit will consist of one common share and one common share warrant; the warrant will have an exercise price of a 25% premium to the VWAP with a term of five years subject to TSX-V approval or other regulatory constraints.
The initial tranche investment of $3.0 million is intended for the acquisition of Mirador and will be comprised of $2.25 million as a secured streaming investment in Montan and $0.75 million as an equity investment in Montan.
Among the conditions to closing Tranche 1 are Montan’s raising at least $1.0 million for optimization CAPEX and working capital at Mirador and securing long-term contracts at Mirador totaling no less than 70% of plant capacity.
Subsequent tranches are subject to satisfactory post-acquisition performance at Mirador, and are expected to comprise two tranches to bring the Cerro Dorado plant into commercial operation and to increase its capacity to 125 tonnes per day.
Upon closing of Tranche 1, Montan will provide CRH with a two percent (2.0%) NSR on the Mirador and Cerro Dorado plants and such other concessions, JV properties and mines that accrue to Kairos SAC or Cerro Dorado SAC; and any future assets acquired, in whole or in part, with CRH funds. 0.5% of the NSR can be purchased by Montan at any time for $750,000. Montan would also have a right of first offer on any sale of the NSR by CRH to a third party.
In addition CRH will have the right to appoint a non-executive director to Montan’s board of directors for as long as the streaming investment is outstanding or CRH owns more than 5% of Montan.
“Cartesian’s tailored financing solution should allow Montan to complete the purchase of the Mirador Plant and bring Cerro Dorado into commercial production shortly thereafter. We are excited at the prospect of having two assets in production before Q4 2017. We are grateful to Cartesian for their approach and the flexibility shown on the basis of project specific needs and our risk-balanced cash flow projections”, stated Luis Zapata, Executive Chairman of Montan.
Peter Yu, Director of CRH stated, “Montan is a unique diversified mineral processing project with strategic locations throughout Peru and is permitted for production. We are confident the Montan team will create substantial value for its stakeholders, as well as artisanal miners in Peru through their efficient and transparent business model”.
photo credit: Montan Mining