Westgold Resources Limited (ASX: WGX), the Australian gold producer, announced on 9th April 2019 that the company has entered into a revised royalty sale agreement for its lithium royalties with Silverstream SEZC, upon expiration of sale agreement with Cobalt 27.
The company initially decided to sell the Mt Marion and Buldania prospect to Silverstream SEZC to divest from the non-core business and the focus on the company’s retained strategy to concentrate on its key gold assets. Westgold entered into a conditional letter of intent (on 7 December 2018) to divest from both the lithium prospect for a headline sale price of A$15 million. As per the agreement, the company allowed for a 75-day period to complete the due diligence and generate AMPLA style royalty documentation.
However, Westgold received a superior offer from Cobalt 27 Capital Corp (on 31 December 2018) for the sale of lithium royalty of both prospects. The company received an offer for a total consideration of AUD$250,000 and 200 metric tonnes of physical cobalt metal in a warranted London Metal Exchange (LME) warehouse. The agreement between the company and Cobalt 27 was subjective to the completion of due diligence and final approval of Cobalt 27 Capital Corp’s board.
As per the company, the sale agreement with Cobalt 27 expired without completion, and the company is now considering the initial sale agreement with Silverstream SEZC.
Now the company will dispose of both the lithium prospect royalties in a binding sale to Silverstream SEZC for A$13 million and A$2 million respectively and receive the total consideration of A$15 million, which was initially decided by both the parties prior to the offer made from Cobalt 27.
However, the Buldania lithium prospect agreement is still subjective to pre-emptive rights with Liontown Resources Ltd. As per the company, it has been advised by Canaccord Genuity Pty Ltd on the transaction.
Westgold had been planning to divest from the lithium assets following the company’s strategy to develop the key assets and manage line of the gold portfolio. However, the company recently sold its Higginsville gold operations to RNC.
Westgold holds three gold prospects in the prolific gold production belts of Western Australia and out of three operational prospects, the company divested from its Higginsville gold operation. Westgold now has two operational prospects, i.e., South Kalgoorlie Operations and Central Murchison Gold Project.
However, the company’s Fortnum Gold project, which hosts a Measured, Indicated and Inferred Resource of 24.3 million tonnes with a grade of 1.79g/t Au, which contains 1.39 million ounces of gold is under development as it is currently under the initial five year development plan, which was adopted by the company in July 2016. The proven and probable resources of the prospect are of 5.67 million tonnes with a grade of 1.76g/t Au, which contains 321,000 ounces of gold.
During the time of writing this report, the shares closed the day’s trading at A$1.255 (as on 9th April 2019), down by 1.95% as compared to its previous close.
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