Norilsk Nickel to get stake in Saracen in exchange for Thunderbox royalty
MOSCOW. April 22 (Interfax) - Saracen Mineral Holdings, to which Norilsk Nickel sold its Thunderbox gold project in Australia (North Eastern Gold Operations) in 2014, has exercised its preemptive right to buy Norilsk's smelter royalty of 1.5% (capped at AUD17 million) relating to this project, the Australian company said in a press release.
Norilsk Nickel will get 8 million new shares in Saracen, which is listed on the Australian Securities Exchange (ASX), plus $500,000 cash. The value of the shares is about $8.56 million.
"The deal is of course profitable for Norilsk Nickel, this is the continuation of the strategy to monetize non-core assets at attractive conditions for Norilsk Nickel," the spokesperson for Norilsk Nickel First Vice President and Executive Director Pavel Fyodorov told Interfax. Norilsk Nickel did not specify the volume of payments for the royalty from Thunderbox managed to implement Saracen.
The total value of the deal with Saracen was AUD100 million, of which Norilsk Nickel received $20 million in cash. Saracen assumed the cost of maintaining the project (which is not yet operational) and environmental obligations to recultivate the land. Saracen is supposed to pay Norilsk Nickel another AUD3 million after mining resumes.
Saracen expects commercial mining at Thunderbox to start in June, after which the company's production will grow to 300,000 ounces. Before the launch of Thunderbox, Saracen's production forecast for the year is 170,000-180,000 ounces.
The cancellation of the royalty is expected to reduce the all-in sustaining costs at Thunderbox by about AUD25 to AUD1,000 per ounce.
The deal "will be of significant benefit to Saracen shareholders because it removes an embedded cost from the Thunderbox business, further expanding the margins and boosting cash generation," Saracen managing director Raleigh Finlayson said.
