Sabina Gold & Silver Corp. [SBB-TSX; SGSVF-OTC; RXC-FSE] said Tuesday December 19 that it has lined up a strategic investor to help finance the development of its flagship Back River Gold Project in Nunavut, northern Canada. Sabina said Zhaojin International Mining Co. Ltd., a leading Chinese gold producer and smelting company, is investing $66.1 million in the Vancouver company via a private placement of 24.9 million common shares at $2.65 a share.
When the transaction closes, Zhaojin will own a 9.9% stake in Sabina.
Investors reacted to the news by sending Sabina shares up 4% or $0.10 to $2.54 in early afternoon trading, Tuesday.
Sabina holds a 100% interest in the Back River Gold Project, which has the potential to produce 200,000 ounces of gold annually for 11 years, according to the results of a feasibility study that was released in September, 2015. At a US $1,150/oz gold price and a 0.80 exchange rate, the study delivers a potential after-tax Internal Rate of Return of 24.2% with an initial capital expenditure of $415 million.
The Minister of Indigenous and Northern Affairs Canada recently informed the company that the Back River Project can move forward to the regulatory and licensing phase, which would include the completion of all necessary permits to commence mine construction.
About six months ago, the Nunavut Impact Review Board (NIRB) completed its review of the environmental assessment of the project and recommended to the Minister that the project should be given approval to obtain the required permits and licenses for mine construction and operation.
“We are very excited to welcome Zhaojin, a leading Chinese gold company,’’ said Sabina President and CEO, Bruce McLeod. He said the investment represents a significant milestone for Sabina and is a strong endorsement of the work completed so far at the Back River Project.
Under the agreement, Zhaojin can increase its stake in Sabina to up to 19.9% by participating in future financings (up to 33% per financing).
The Chinese firm will also have to right to nominate one director to Sabina’s board to represent its 9.9% interest. It can nominate a second director once that interest increases to 19.9%.
Sabina has said its goal is to become a mid-tier gold producer in politically safe mining jurisdictions. The company’s other properties are located in the Red Lake, Ontario region. They include the Golden Sidewalk Property. It hosts the past-producing Bathurst Mine, which saw sporadic production between 1928 and 1937.
The company also owns a significant silver royalty on the Hackett River Project, located 45 km east of the Back River property. The silver royalty on Hackett River silver production consists of 22.5% of the first 190 million ounces produced and 12.5% of all silver produced thereafter.
The property is owned by Glencore Canada Corp. a subsidiary of Swiss metals trader Glencore.