Orea shares surge on revised deal for Nordgold’s stake in French Guiana project

Orea Mining (TSX: OREA; OTC: OREAF) has signed a revised agreement to acquire Nordgold’s 55.01% interest in the Montagne d’Or gold project in French Guiana, the company said on Thursday. 

Orea had expected to close the proposed deal in late February, but it was delayed due to sanctions imposed by the Canadian government on Nordgold’s Russian controlling shareholders.

The revised arrangement comes after the two joint venture partners announced an initial deal last August.

Under the original deal, Orea agreed to buy Nordgold’s majority stake in the 5-million-oz. project, which has reached a development stage, for $100 million. The amount would only be payable when the Montagne d’Or JV receives all permits necessary for mine construction.

However, the Canadian government stymied the arrangement, forcing the company to terminate the deal last month. 

“It is the understanding of Orea and its legal advisors that there are no conditions under which Canada will approve the acquisition, even though other countries that are close allies of Canada have approved or not objected,” Orea stated in a June 13 news release.

The Vancouver-headquartered miner has since retracted the termination and subsequently worked out an amended agreement, under which the $100-million payment will only be made if and when all sanctions are lifted against Nordgold and its shareholders in all applicable jurisdictions, including in Canada, the U.S., France, the U.K. and the EU.

The amended deal also stipulates that the payment will no longer be due or payable if sanctions are still in effect three years from receipt by Orea of all permits to operate a gold mine at Montagne d’Or, and seven years from closing of the acquisition.

The applicable sanctions authorities are now reviewing the amended agreement, Orea said in a news release on Thursday.

French court ruling

Meanwhile, the company is awaiting a decision by the Supreme Court of France regarding the renewal of the Montagne d’Or mining titles. The open pit gold project currently hosts measured resources of 10.3 million tonnes grading 1.8 grams gold per tonne for 600,000 oz.; indicated resources of 74.8 million tonnes at 1.3 grams gold for 3.2 million oz.; and inferred resources of 20.2 million tonnes at 1.4 grams gold for 960,000 ounces.

A feasibility study produced in 2017 gave Montagne d’Or an after-tax net present value (using a 5% discount rate) of US$370 million and an internal rate of return of 18.7% using a gold price of US$1,200 per ounce. The initial capital cost was estimated at US$361 million, with a payback period of 4.1 years.

The project was expected to average 214,000 oz. per year over a 12-year mine life, though production over the first 10 years of the mine will average 237,000 oz. annually. All-in sustaining costs are US$779 per oz. of gold over the life of the mine, including closure and reclamation.

Following the amended agreement, Orea’s share price saw a significant bump on Thursday, up 40% to 3¢ apiece in late afternoon trading in Toronto for a market capitalization of $5.6 million.

 

This article has been corrected. A previous version stated that Orea had deferred the buyout. We apologize for the error.