Golconda Gold (TSXV: GG) has secured a streaming transaction with Empress Royalty (TSXV: EMPR) that will enable it to put cash on its balance sheet.
The streaming deal will see Empress obtain rights to 3.5% of the payable gold production from Golconda’s Galaxy Mine in South Africa, for an initial 8,000 payables ounces. The stream will reduce to 2.0% of gold production thereafter, until 20,000 ounces have been paid to Empress or a 20 year period lapses. The gold will be sold at 20% of the gold spot price under the terms of the transaction.
In exchange, Golconda will receive an up-front payment of US$5.0 million, which will be used to purchase new underground equipment and to cover the working capital costs of further underground development to improve production. The firms processing plant reportedly has 35,000 tonnes of production of spare capacity that will be worked to be filled with further development.
The Galaxy Gold Mine, which the company acquired in 2015, currently is producing at a rate of 15,000 tonnes per month, resulting in 1,100 gold ounces being recovered each month. Phase 2 is expected to improve recoveries to 2,800 ounces each month, while 48,000 tonnes are to be processed on a monthly basis.
This production rate however appears to be rather new, with the company producing 1,584 gold ounces in the first quarter, and 1,689 ounces in the second quarter of this year. The company is also walking a thin line from a financial perspective, with a working capital deficiency of $6.5 million as of June 30, and cash of just $267,000.
Golconda Gold last traded at $0.10 on the TSX Venture.
Information for this briefing was found via Sedar and sources 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.
