Maverix Metals to acquire royalty portfolio from Gold Fields
Mr. Daniel O'Flaherty reports
MAVERIX METALS INC. DOUBLES IN SIZE WITH ACQUISITION OF ROYALTY PORTFOLIO FROM GOLD FIELDS LIMITED & PAN AMERICAN SILVER CORP. PROVIDES FINANCIAL SUPPORT WITH EARLY EXERCISE OF WARRANTS
Maverix Metals Inc. has entered into a purchase and sale agreement with Gold Fields Netherlands Services BV (a wholly owned subsidiary of Gold Fields Ltd.) and certain of its affiliates, pursuant to which:
- Maverix agreed to acquire a portfolio of 11 royalties from Gold Fields;
- Maverix has agreed to issue to Gold Fields a total of 42.85 million common shares from its treasury and 10 million common share purchase warrants of Maverix exercisable for five years at $1.204 (U.S.) ($1.60) per common share;
- All in accordance with the terms and conditions of the agreement.
- Immediate and significant cash flow: The Gold Fields royalty portfolio will provide immediate leverage to gold, silver and nickel prices. Five of the 11 royalties being acquired are on mines that are currently in production and have been making quarterly royalty payments.
- Growing cash flow: Operators of the underlying mines have been increasing reserves, extending mine lives and ramping up production, which should provide growing cash flow over a longer period of time.
- Asset diversification: The Gold Fields royalty portfolio provides exposure to attractive mining jurisdictions with interests in mining assets in Australia (six), Chile (one), Dominican Republic (one), the Democratic Republic of the Congo (one), French Guiana (one) and Canada (one); and these assets include five producing mines, as well as projects in the prefeasibility, scoping and early exploration stages.
- Counterparty diversification: The Gold Fields royalty portfolio counterparties include Evolution Mining Ltd., Royal Nickel Corp., Ramelius Resources Ltd., Independence Group NL and Yamana Gold Inc., which collectively will diversify operational risk for Maverix.
- Long-term optionality: The Gold Fields royalty portfolio will provide exposure to projects that are undergoing active exploration programs.
- New supportive major shareholder: Gold Fields will join Pan American Silver Corp. as a major shareholder in Maverix, which will provide Gold Fields shareholders, along with Pan American shareholders, meaningful continuing exposure to the enhanced and enlarged Maverix portfolio of assets. Further, Gold Fields will also be in a position to identify opportunities for Maverix, thereby assisting in its future growth for the benefit of all shareholders.
Geoff Burns, chairman of Maverix, commented: "This transaction is an exceptional growth step for Maverix. Our shareholders should benefit from the immediate meaningful increase in annual cash flow, the increase in scale, and the geographic and counterparty diversification. Our longer-term access to capital markets, our liquidity and our market profile should all be significantly enhanced." Mr. Burns continued, "I would like to personally thank Gold Fields for the confidence they are showing and for their endorsement in selecting Maverix to steward their royalty portfolio."
Royalty portfolio -- key assets
The royalty portfolio includes the following key assets, the majority of which will immediately contribute cash payments to Maverix:
- Mount Carlton net smelter return (NSR) royalty (Queensland, Australia) -- a 2.5-per-cent NSR royalty payable quarterly by Evolution Mining on revenue from production minus allowable charges from certain tenements at the high-grade, open pit Mount Carlton mine, located 150 kilometres south of Townsville, Queensland;
- Beta/Hunt gross revenue royalty (Western Australia, Australia ) -- a 6-per-cent gross revenue royalty payable quarterly on all gold production and 1-per-cent NSR royalty payable quarterly on all revenue from nickel production minus allowable charges from certain tenements at the underground Beta Hunt mine located 600 kilometres from Perth in Kambalda, Western Australia; the Beta/Hunt royalties (gold and nickel) are payable by Royal Nickel;
- Vivien gross revenue royalty (Western Australia, Australia) -- a 3-per-cent-to-4.5-per-cent gross revenue royalty payable quarterly by Ramelius on all products mined from the relevant tenements at the Vivien gold mine, located 15 kilometres west of the town of Leinster, Western Australia; the maximum rate of 4.5 per cent applies in respect of the first 25,000 ounces produced; the rate will then reduce to 3.5 per cent or, if the ore is treated at the mill at the Agnew gold mining operations, 3 per cent;
- Lightning nickel royalty (Western Australia, Australia) -- a variable sliding-scale royalty of 0.65 per cent to 5 per cent of the value of the imputed nickel in concentrate contained in each monthly delivery payable by Independence Group on nickel mined from certain tenements comprising part of its Long operation, located 56 kilometres south of Kalgoorlie, Western Australia;
- Dominador NSR royalty (II Region de Antofagasta, Chile) -- a 2-per-cent NSR royalty payable by Yamana on all minerals mined from the Nado concessions (other than the Angelina porphyry), which form part of the El Penon properties located near Antofagasta in northern Chile and a 1-per-cent NSR royalty on all mineral production on the area called the Angelina porphyry, located within the Nado concessions; the royalty is subject to a right of first refusal held by Yamana;
- Romero NSR royalty (San Juan and other provinces, Dominican Republic) -- a 1.25-per-cent NSR royalty payable by Goldquest Mining Corp. on all minerals mined from certain concession located in the Dominican Republic.
Royalty portfolio -- other assets
The royalty portfolio also includes the following royalties and interests which have the potential of generating additional cash flow for Maverix in the future:
- Kisenge royalty (Katanga province, the Democratic Republic of the Congo) -- a 1.5-per-cent NSR royalty payable on all commercial production mined from the Kisenge project (including the Mpokoto gold project, which is 80 per cent held (directly or indirectly) by Armadale Capital PLC; the Mpokoto gold project is currently in the prefeasibility stage. It is located in the western part of the Katanga province, approximately 250 kilometres west of Kolwezi in the southwest of the Democratic Republic of the Congo);
- Panton Sill NSR royalty (Western Australia, Australia) -- a 2-per-cent NSR royalty once production exceeds 100,000 ounces of platinum group metals mined from certain tenements in the Panton platinum group metal project held indirectly by Panoramic Resources Ltd; the project is currently in the scoping stage; it is located in the Shire Halls Creek, in the East Kimberley region of Western Australia;
- Scotia gold royalty (Western Australia, Australia) -- upon production of 200,000 ounces of gold from relevant tenements, a payment of $1.20 (Australian) per dry tonne of ore milled from any gold mining operations carried out upon the relevant tenements forming part of the Scotia gold and nickel project (currently in the early exploration stage), located 65 kilometres northwest of Kalgoorlie in the Goldfields district of Western Australia payable by Minotaur Exploration Ltd.;
- Wayamaga net return royalty (Saint Laurent du Manoni, French Guiana) -- a 1-per-cent net return royalty payable by Golden Star Resources Minieres SARL on gold and all other metals mined from the early-exploration-stage project conducted on the A-Bon Espoir permit and/or any other mining permit for production within the area covered by that permit located in the Amadis region of French Guiana;
- Committee Bay project diamond sales return royalty (Nunavut, Canada) -- a 1-per-cent of sales return royalty is payable in respect of sales of diamonds mined from the relevant mineral titles forming part of the early exploration Committee Bay project (which includes the Three Bluffs project) located in Nunavut, Canada, held by Auryn Resources Inc.
Terms of the transaction
Closing of the transaction is expected to occur on Dec. 20, 2016, or as soon as possible thereafter. In addition to conditions customary for similar transactions, closing of the transaction is conditional upon: (i) Maverix receiving the necessary TSX Venture Exchange approval; (ii) Maverix shareholder approval; (iii) entry by Maverix and Gold Fields into a shareholder agreement in a form to be agreed upon between the parties on or before the closing date; and (iv) entry by Maverix and Gold Fields into assignment agreements, pursuant to which the royalties forming the royalty portfolio will be transferred from Gold Fields to Maverix on or before the closing date and the entity obliged to pay the royalty will be a party to such agreements or their consent will be obtained (as required).
Pursuant to the rules of the TSX-V, a simple majority of Maverix shareholders have approved the transaction by way of a written consent resolution, including Pan American Silver and the board of directors of Maverix. The agreement was negotiated at arm's length between Maverix and Gold Fields.
Financing with Pan American Silver
Maverix is also pleased to announce an early warrant exercise incentive arrangement with Pan American Silver designed to encourage the early exercise of Pan American Silver's 10 million Maverix common share purchase warrants exercisable at 54.6 U.S. cents (70 cents) per Maverix common share and expiring on July 8, 2021. Pursuant to the incentive arrangement:
- Pan American Silver has agreed to exercise the warrants on the closing date for $5.46-million (U.S.).
- As an incentive for Pan American Silver to exercise its warrants 4.5 years before the expiration date, Maverix will issue to Pan American Silver 6.5 million common share purchase warrants exercisable at $1.204 (U.S.) ($1.60) per common share of Maverix and expiring on July 8, 2021.
The exercise and new issuance are conditional on closing of the transaction and TSX-V approval. When completed, the exercise and new issuance will significantly bolster the company's cash position and allow it to further grow its portfolio of royalty and streaming assets. The exercise and new issuance demonstrate Pan American Silver's continued support of Maverix.
"The early exercise of warrants puts Maverix in a more advantageous position to deliver on additional near-term growth initiatives. We would like to thank Pan American for the financial commitment and their confidence in Maverix's ability to create shareholder value," said Maverix's chief executive officer, Dan O'Flaherty.
Maverix postclosing capital structure
After the completion of the transaction and the exercise and new issuance, Pan American Silver will hold approximately 40 per cent of the issued and outstanding common shares of Maverix and Gold Fields will hold approximately 32 per cent of the issued and outstanding common shares of Maverix. It is expected that Maverix will have a total of approximately 132.7 million shares issued and outstanding following the closing of the transaction and the exercise and new issuance.
Gold Fields shareholder agreement
Pursuant to the transaction, Gold Fields and Maverix will enter into the shareholder agreement in substantially similar form to the shareholder agreement that currently exists between Maverix and Pan American Silver, pursuant to which Gold Fields and Maverix will agree that, among other things:
- Provided that Gold Fields' shareholdings of Maverix are equal to or exceed 20 per cent of Maverix's outstanding common shares, Gold Fields will be entitled to one nominee for election to the Maverix board of directors.
- Gold Fields will receive certain rights in respect of equity financings of Maverix, including certain anti-dilution rights.
- Gold Fields' shareholdings in Maverix will be subject to certain restrictions, including a minimum hold period, and, following that, certain restrictions to ensure the orderly disposition of its shareholdings.
- Gold Fields will give Maverix notice and an opportunity to make an offer to acquire any metal stream or metal royalty transactions which Gold Fields contemplates granting.
Maverix's primary purpose is to acquire and hold predominantly precious metals streams and royalties and, in so doing, to provide significant leverage to gold and silver prices for its shareholders.
We seek Safe Harbor.
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