It appears that Bear Creek Mining (TSXV: BCM) is nearly giving away the farm in an effort to acquire Equinox Gold’s Mercedes Gold Mine. The firm has entered into an arrangement with Sandstorm Gold (TSX: SSL) for both a royalty arrangement, as well as a convertible debenture financing.
In terms of the royalty, Bear Creek has agreed to a US$37.5 million royalty, which will see the company deliver a total of 25,200 ounces of gold over a period of three and a half years. In year one, a total of 5,400 ounces are to be delivered, with every year thereafter consisting of 7,200 ounces, or roughly 14.4% of the annual 50,000 ounces production of the mine.
Under the first three and a half years of the royalty arrangement, Bear Creek will receive just 7.5% of the spot price of gold for each ounce sold under the royalty arrangement. After the initial three year term, the company will see a 4.4% gold stream provided to Sandstorm under the current royalty arrangement, at a price of just 25% of the spot price of gold.
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The company has also seen Sandstorm invest US$22.5 million in the company via a convertible debenture. The debt under the financing bears interest at a rate of 6% per annum, and has a maturity of three years. The debt can be converted to shares at a 35% premium to the price of the company at the time of the Mercedes Mine acquisition closing.
In all, the US$37.5 million received from the royalty arrangement and the US$22.5 million will be used to fund the majority of the initial US$75 million payment required to be paid to Equinox Gold upon closing of the transaction, with a further $25 million in cash due within six months of closing.
Bear Creek Mining last traded at $1.51 on the TSX Venture.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
