Galantas Gold (TSXV: GAL) has given up a majority interest in its flagship Omagh Gold project in Northern Ireland in exchange for the settlement of certain debt under a binding term sheet.
The company has agreed to enter a joint venture arrangement with Ocean Partners, exchanging an 80% interest in the subsidiaries that own the Omagh project in exchange for the settlement of US$14 million in existing loans. Galantas is to retain a 20% interest following the transaction, with Ocean Partners having the option to convert US$1 million in remaining debt to a further 0.001% interest after mining has restarted at Omagh.
As part of the arrangement, Ocean Partners has committed to invest an initial $3 million for exploration, a restart plan, and general and administrative costs at Omagh, for a period of up to one year. After this initial term, they will have the option to invest a further $5 million for exploration and the commissioning of a development program. Galantas is to be free-carried under the initial investment, but is required to commit its pro-rata portion for the second term to maintain its interest.
Under the initial term, Galantas will have the option to convert its 20% interest to a 3.00% NSR royalty, 50% of which can be repurchased for $8 million in cash. If Galantas interest is diluted to below 10% post-initial term, their interest shall convert to a 1.5% NSR, 50% of which can be repurchased for $4 million.
“The Proposed Transaction represents a turning point in the Omagh Project’s development, enabling Galantas to benefit from a recommencement in production amid rising gold prices, while also strengthening the Company’s balance sheet. The Company will have the benefit of receiving gold ounces once the Omagh Project is restarted, while also advancing the Gairloch high-grade gold and copper VMS project in Scotland,” commented Mario Stifano, CEO of Galantas, on the transaction.
The transaction remains subject to shareholder approval at a meeting to be held August 5, and the completion of due diligence by Ocean Partners.
Galantas Gold last traded at $0.09 on the TSX Venture.
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