Gascoyne Resources has announced a $50 million funding package to further delineate and expand the high-grade Never Never gold deposit, and progress an updated long-term operating plan for its 100 per cent owned Dalgaranga Gold Project in Western Australia.
This $50 million package is split into $26.3 million equity raising, a $21.3 million investment by Tembo Capital, and a $2.5 million unsecured loan from Delphi.
Gascoyne intends to allocate the $50 million received from the equity raising, the Tembo Capital investment and the Delphi royalty, along with its existing cash of $11.9 million (as at 31 December 2022), as follows:
- Exploration, studies and care & maintenance costs – $39.2 million
- $24.9 million to be dedicated to Never Never exploration including “look-alike” targets and Yalgoo studies
- $2.7 million to fulfil minimum expenditure commitments and maintain good standing on remaining tenements
- $11.6 million for care and maintenance costs for Dalgaranga through to the end of June 2024
- Corporate costs and general working capital – $11.6 million
- $8.6 million intended to fund corporate costs for Gascoyne through to mid-2024
- $3 million excess working capital
- Redundancy costs and liability extinguishment – $6 million
- $1.5 million in redundancy costs
- $4.5 million due to creditors under binding settlement agreements
- Transaction and other costs – $5.2 million
Following the decision to place the Dalgaranga mining operations on care & maintenance in November 2022, the company has worked swiftly to develop an updated operating plan focused on the transformational Never Never discovery, which is located immediately adjacent to the Dalgaranga mill.
Following assessment of the outstanding exploration results to date, Gascoyne has developed an 18-month exploration and strategic plan targeting:
- A +300koz Au Reserve at a grade exceeding 4.0g/t at Never Never
- A +600koz Au Resource at a grade exceeding 5.0g/t at Never Never
- The development of a 5-year mine plan aimed at delivering 130-150koz per annum
This updated strategy centres around an aggressive exploration programme at Never Never, comprising extensive reserve definition, resource expansion and near-mine exploration drilling targeting Never Never ‘look-alikes’.
Gascoyne also has plans to undertake the development of an underground exploration drill drive, planned to commence in mid-2023. Underground drill platforms will be utilised for Never Never underground reserve drilling, in addition to testing depth extensions of the deposit below the current Mineral Resource Estimate (MRE).
The drill drive will also provide eventual underground mine access and ventilation infrastructure as the company moves back into production.
Gascoyne is progressing permitting and evaluation of the satellite Yalgoo Project in parallel with the company’s planned exploration program, which is expected to provide an important source of ore feed to supplement the high-grade ore from Never Never.
Gascoyne anticipates updating the MRE at Never Never approximately every six months, with the objective of ultimately delivering a maiden Never Never Ore Reserve, comprising both an open pit and underground component, in the first half of 2024.
Gascoyne launched a fully underwritten $26.3 million equity raising comprising the issue of approximately 263 million shares of new fully-paid ordinary shares in the company at an issue price of $0.10 per New Share.
The equity raising comprises:
- An underwritten institutional placement of approximately 86 million new shares to raise approximately $8.6 million
- An underwritten one-for-2.42 pro-rata accelerated non-renounceable entitlement offer of around 176 million New Shares to raise approximately $17.6 million
Tembo Capital investment details
Gascoyne has also entered into binding agreements with Tembo Capital for a $21.3 million investment in Gascoyne.
The Tembo Capital Investment is split across two tranches and comprises the following material aspects:
- Tranche A – $15 million secured loan (plus establishment fee and five per cent redemption premium) to mandatorily convert to fully-paid ordinary shares in Gascoyne at $0.10 per share (being the same price as new shares issued pursuant to the equity raise)
- Tranche B – $6.3 million secured loan to mandatorily convert to a 1.8 per cent gold royalty over all
- 100 per cent owned Dalgaranga tenements and a 1.35 per cent gold royalty over all 100 per cent owned Yalgoo, Glenburgh and Mt Egerton tenements, upon Conversion of Tranche A8
- Draw down of the Tembo Capital Investment is subject to conditions precedent, the majority of which are customary for a facility of this nature. A non-customary condition precedent to drawdown is the requirement to obtain voting intention statements from shareholders representing an aggregate of at least 15 per cent of the current shares on issue in Gascoyne
- Prior to Conversion and while Tranches A and B remain outstanding, interest is payable monthly in arrears in cash at a rate of 15 per cent per annum
- While Tranches A and B remain outstanding, Tembo Capital shall have senior security over the assets of the Company, subject to carve outs that are customary for a facility of this nature
- Upon shareholder approval being obtained for the issue of shares to Tembo Capital pursuant to conversion of Tranche A and Gascoyne raising at least $20 million under the equity raising, Tembo Capital must give a conversion notice to respectively convert Tranches A and B into Gascoyne shares and the gold royalty within five business days
- Upon conversion, Tembo Capital’s senior security over the assets shall be discharged and be replaced with a mining mortgage over the company’s mineral tenements to protect the interests of Tembo Capital’s gold royalty
Details of the Delphi unsecured loan
In addition to its commitment of up to $5.8 million in the equity raising, Delphi has entered into a binding agreement with Gascoyne to provide a $2.5 million unsecured loan to mandatorily convert to a 0.7 per cent gold royalty over all 100 per cent owned Dalgaranga tenements and 0.525 per cent gold royalty over all 100 per cent owned Yalgoo, Glenburgh and Mt Egerton tenements.
Mandatory conversion of the unsecured loan to the Delphi royalty is subject to, among other things, shareholder approval to be sought at an EGM that is expected to be held in mid-June 2023. The notice of meeting for this EGM is expected to be accompanied by an independent expert report opinions on the fairness and reasonableness of the Delphi Royalty to non-associated shareholders.
There are no conditions precedent to the drawdown of the unsecured loan. The unsecured loan from Delphi matures upon the earlier conversion of the unsecured loan to a royalty and 12 months from 25 February 2023. While the loan remains outstanding, interest is payable monthly in arrears in cash at a rate of 15 per cent per annum.
Gascoyne has a right to buy-back up to 20 per cent of the royalties issued to Delphi for a four-year period.
Company directors believe that on drawdown of the Tembo Capital and Delphi facilities, and completion of the Placement and Entitlement Offer, the company will have sufficient working capital available to meet its stated business objectives.
