Trigon Metals Inc has officially announced a binding loan agreement with Horizon Corporation Ltd for a loan of up to $5 million.
As a part of this agreement, Trigon has granted Horizon rights to negotiate the purchase of Trigon’s interest in the Kombat Mine. More on the same would reveal how the agreed terms place valuation for the Kombat mine at $30 million (C$0.97/share based on today’s fully-diluted share count), which is still subject to definitive agreements, shareholder approval, regulatory consent, and other closing conditions.
Markedly enough, the stated loan will allow Horizon to begin investing in the Kombat Mine and provide capital to the project in advance of the completion of the sale. Now, if Trigon and its shareholders elect to exercise the acquisition option, the loan will become equity contributed to the Kombat Mine. Having said so, assuming Trigon chooses not to complete the transaction, the funds will become payable as loans to the company, along with break fees.
Talk about the agreed terms on a slightly deeper level, we begin from how the promised $5 million will be issued in 3 tranches to provide interim development capital for the Kombat Mine. The first tranche would include an amount worth $500,000 and it will be disbursed within 7 working days of signing the loan agreement. The next tranche would include $2 million and it will come within 7 working days of completing the security agreements and approvals related to the loan agreement. As for the final tranche, it will bring $2.5 million within 45 days of the tranche two payment.
Furthermore, the loan will have a grace period of 6 months from the drawdown date of tranche two. It will also be amortized over 18 equal payments from the end of the grace period to the end of the 2-year term at an annual interest rate of 15%.
Moving on, the agreement gives Horizon an option to appoint a board observer to the company on advance of tranche two loan. Apart from that, the company will also be granted exclusivity to negotiate and finalize the acquisition on advance of tranche loan.
“This deal is a decisive win for the Company and shareholders. We had been committed to operating and growing the Kombat mine but this deal offers the Company and shareholders an opportunity to maximize growth for the Company as a whole. The Agreement allows us to realize significant value from the Kombat Mine in an expensive and uncertain funding market while ensuring stability and continuity for the workforce at site. The influx of capital will position Trigon to advance exploration and development at our Addana and Kalahari projects,” said Jed Richardson, CEO and Executive Chairman of Trigon Metals.
Now, assuming Trigon does go ahead with the transaction related to Kombat Mine acquisition, Horizon will acquire up to 100% of a domiciled holding company, which indirectly owns 80% of the Kombat Mine.
In that case, Trigon will retain a 1% net revenue royalty on copper production when the Kombat mine achieves copper metal production of 1,000 tonnes for each of two consecutive calendar months. From there onwards, a royalty of 1% will be payable on net copper revenue, when invoiced copper price on final invoicing is greater than $4.00 per pound, payable quarterly for a total of 20 quarters.
Among other things, we ought to mention that a a break fee of $5 million will be applied if the proposed transaction is terminated due to non-approval or a superior bid. On the flipside, there is going to be a follow-up payment ranging between $10 million to $20 million when underground production exceeds on average of 2,250 tpd over 90 days, as well as once the streaming copper royalty reduces as per the Sprott streaming agreement.
