Aspiring gold project developer, Middle Island Resources Limited (ASX: MDI) is an Australian-headquartered company whose primary ambition is to recommission its wholly-owned, 600,000tpa Sandstone gold processing facility, which has been on care and maintenance since September 2010.
About Middle Island Resources Limited
Middle Island’s activities are focussed on its flagship project, Sandstone Gold Project, which has substantial additional exploration upside. In July 2016, the project was acquired by Middle Island for a total consideration of AUD 2.5 million from the Receivers of Black Oak. Following the acquisition of the project, the company created an overarching strategy that included the following elements:
The company has so far progressed actively with its comprehensive strategy and aims to enhance and extend the proposed gold production profile for the Sandstone Gold Project via unique approaches to recommission its processing plant as quickly as possible. Middle Island has already achieved considerable success in encompassing the proposed production schedule via TMH tonalite deeps deposit and TMH BIF underground deposits.
In order to focus completely on the development of its advanced Sandstone Gold Project, the company has divested its 100 per cent interest in its Reo Gold Project located in West Africa. Middle Island has recently reported about the completion of the divestment transaction through an ASX announcement.
Details of Reo Gold Project’s Divestment Transaction
Middle Island on 3 September 2019 notified that Vancouver-based company Tajiri Resources Corporation has exercised its option to completely acquire the company’s Reo Gold Project located in Burkina Faso, West Africa. The acquisition came into effect after the final payment of Option Extension and Exercise Fee of USD 150,000 was completed by Tajiri to Middle Island.
In February 2018, Middle Island executed a Heads of Agreement (HoA) with Tajiri, for granting an option to Tajiri to acquire a 100 per cent interest in the Reo Gold Project. The terms of agreement involved an aggregate cash payment of USD 335,000 to Middle Island and an issue of 5 million fully paid TAJ ordinary shares, representing ~8 per cent of Tajiri’s register on a fully diluted basis along with a residual 2 per cent net smelter return (NSR) production royalty that Tajiri had a right to acquire for USD 5 million.
Terms of Agreement
Under the agreement, Tajiri had to pay an upfront USD 35,000 as an exclusivity fee to MDI on the implementation of the agreement in return for a 3-month period to conclude its due diligence process.
On signing of a formal Option to Purchase Agreement and satisfactory finalisation of due diligence, Tajiri was to pay first tranche of USD 150,000 and issue 2.5 million shares to MDI. In return to this payment, MDI was to offer an 18-month period to Tajiri to exercise exclusive option to purchase MDI’s 100% interest in the Reo project.
If Tajiri chose to exercise the Option, it had to pay the remaining USD 150,000 and issue a further 2.5 million Tajiri shares, with MDI retaining a 2% NSR royalty on any minerals derived from the Reo project. On the other hand, if Tajiri chose not to exercise the Option, MDI was to retain all consideration paid to MDI while keeping its 100% interest in the Reo Project.
Later on, to comply with the TSX(V) regulations, Tajiri requested via a Letter of Variation to issue all 5 million Tajiri shares to MDI on beginning of the 18-month option period, instead of dividing the issue of shares evenly between the initiation and exercise of the Option.
What Does Reo Project’s Divestment Transaction Mean for MDI?
Although MDI has divested its 100 per cent interest in the Reo Gold Project, it has attained considerable benefit from the transaction. Middle Island’s Managing Director, Mr Rick Yeates mentioned the following advantages to MDI from the divestment transaction:
- The completion of the Reo project transaction will allow MDI to entirely focus on its progressive Sandstone Gold Project’s development in WA.
- The transaction structure enables the company’s shareholders to maintain a substantial indirect share in the upside potential of the Reo Gold Project via Tajiri’s royalty and equity constituents.
- The full equity component (represents 8% of Tajiri’s issued capital) also offers MDI shareholders an extensive exposure to Tajiri’s highly prospective gold exploration projects in Guyana, South America.
It can be inferred that the completion of the divestment process will enable the company to concentrate fully on its Sandstone Gold Project, thereby accelerating its development activities and assisting in sooner attainment of its strategic objectives.
Stock Performance: On 3rd September 2019, MDI closed the trading session at AUD 0.007 with 100k number of MDI shares in trade. The massive return of 75 per cent delivered by the stock on a YTD basis highlights its exceptional performance in 2019 so far.
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