Africa-focused base and precious metals exploration and production company Cradle Arc has entered into an option agreement to sell its Matala and Dunrobin gold assets, in Zambia, to Singa Holdings Zambia.
The assets are currently held by Cradle Arc subsidiary Luiri Gold Mines.
Cradle Arc has granted Singa an exclusive option to initially form a joint venture for the operation of the Matala and Dunrobin gold assets.
This option will expire on June 30, unless extended.
Cradle Arc has further granted Singa an exclusive option to acquire the entire issued share capital of Luiri for $2.5-million.
The share option expires on July 1; however, Singa may extend the share option period for up to two months by paying Cradle Arc $50 000 for each month that the option period is extended.
Singa will use the share option period to complete its formal legal and technical due diligence.
On receipt of the cash consideration, Cradle Arc will transfer to Singa 75% of the shares, with the remaining 25% of the shares being transferred to Singa upon the start of commercial production of gold, at which point the proposed JV will terminate.
Once Singa has acquired 100% of Luiri, a royalty of up to a maximum amount of the net present value of $2.5-million discounted at 8% yearly is payable by Singa Cradle Arc.
The royalty will be calculated as 1.5% of the gross revenue generated from any mining operations on the HQ-8074-LML mining licence, which hosts the Matala and Dunrobin gold deposits.
“The development of our Zambian gold assets has long been an important goal for the company. We are, however, extremely mindful of the potential dilution that raising equity funds for the development of Matala could have on existing shareholders at the company’s current share price and we, therefore, consider that this partnership with Singa represents the best path towards potential production in the near to mid-term,” said Cradle Arc CEO Kevin van Wouw.