Scottie Resources (TSXV: SCOT) has managed to secure a portion of funding for what they refer to as the Scottie DSO Project, which puts the development stage company on a path towards production.
The funding is said to be earmarked for “late stage construction” as well as working capital and cost overruns, and is intended to be a part of a larger financing package that will be developed following the release of a preliminary economic assessment on the DSO project later this year.
The funding package comes from Ocean Partners UK Limited, whom have agreed to enter into a commercial offtake agreement while providing an equity investment, construction loan, and overrun facility to Scottie. The offtake arrangement itself is for 100% of the production expected to come from the DSO project over the first 8 years of commercial production.
The operation, which is expected to provide high quality crushed direct shipped ore to Ocean Partners, is said to eliminate the need for a grinding operation at the Scottie mine site as a result of the grades found within the ore.
In exchange for the commercial offtake, Ocean Partners has agreed to invest $6.0 million into Scottie, which will take the form of an $8.4 million charitable flow through funding round, while also providing a US$25 million construction loan and overrun facility. The loan is said to have a term of 24 months from the initial drawdown period and is available within 6 months of commercial production. The interest rate is set at 12 months SOFR + 7%. Repayment will see a 6 month grace period followed by 18 equal payments.
The investment is expected to make Ocean Partners the largest shareholder of Scottie, with htose shares being subject to a 24 month lockup arrangement. Ocean Partners will also have the right to appoint one director to Scottie’s board as part of the investment. As part of the arrangement, Scottie will maintain termination rights for the first 18-months, which can be executed in exchange for a lump sum payment.
The associated PEA is scheduled to be released in the fourth quarter of this year for the DSO project, which will be followed by the completion of a feasibility study.
Scottie Resources last traded at $0.95 on the TSX Venture.
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