Orea defers buyout of Nordgold’s stake in French Guiana project pending sanction outcome

Orea Mining (TSX: OREA) (OTCQB: OREAF) (FSE: 3CG) is deferring its proposed acquisition of Nordgold’s 55.01% interest in the Montagne d’Or gold […]
Montagne d’Or gold project in northwestern French Guiana. Credit: Columbus Gold

Orea Mining (TSX: OREA) (OTCQB: OREAF) (FSE: 3CG) is deferring its proposed acquisition of Nordgold's 55.01% interest in the Montagne d'Or gold project in French Guiana after amended agreement was executed between the joint venture partners.

In August 2022, Orea announced that it would be buying out Nordgold's majority stake in the 5-million-ounce project, which has reached a development stage, for $100 million. This amount will only be payable when the Montagne d’Or JV receives all permits necessary for mine construction.

However, Orea's permit application regarding the acquisition was recently denied by the Canadian government, forcing the company to terminate the deal in June 2023. "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 US, France, the UK and the EU.

The amended agreement also stipulates that the payment will no longer be due or payable if sanctions are still in effect the earlier of 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 stated in a news release on Thursday.

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 at 1.804 g/t gold (600,000 oz), indicated resources of 74.8 million tonnes at 1.350 g/t gold (3.25 million oz) and additional inferred resources of 20.2 million tonnes at 1.48 g/t gold (960,000 oz).

A feasibility study produced in 2017 gave Montagne d’Or an after-tax net present value (5% discount) of US$370 million and an internal rate of return of 18.7% using a gold price of US$1,200/oz. 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 20% by noon EDT for a market capitalization of $5.6 million.



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