Coral Gold Resources Ltd. [CLH-TSXV; CLHRF-OTC; GV8-Berlin, FSE] has entered into a purchase and sale agreement with Barrick Cortez Inc., a subsidiary of Barrick Gold Corp. [ABX-TSX, NYSE], for the sale of the Robertson Property located 60 miles south of Elko, Lander County, Nevada, to Barrick.
Under the terms, Barrick will pay Coral US $15.75 million (CDN $20.17 million based on the current exchange rate) in cash on closing as well as the return of 4,150,000 common shares of Coral held by Barrick (which represent approximately 8.7% of the Coral’s shares outstanding as of June 20, 2016) for cancellation.
There is also a sliding scale of 1% to 2.25% net smelter returns royalty (NSR) on the Robertson property, payable quarterly to Coral, subject to potential advance royalty payments as outlined below, as well as a right of first refusal enabling Barrick to acquire the NSR in the event Coral wishes to sell the NSR to any third party. The sliding scale NSR rate will be determined based on the observed gold price during each quarterly period based on the average LBMA Gold Price PM during the quarterly period.
If the Robertson property is not placed into production by December 31, 2023, then beginning January 1, 2024, and continuing on an annual basis thereafter until the earlier of the date commercial production begins and January 2, 2033, Barrick will make advance royalty payments to Coral Gold of US $0.5M, which will be non-refundable and fully credited against any future obligations under the NSR. Barrick will also assume all liabilities relating to the Robertson property, and will provide replacement security for the reclamation bond.
The cash consideration alone, excluding the value of the NSR, exceeds Coral’s basic market capitalization based on the closing share price as of June 20, 2016 on the TSX Venture Exchange by approximately 116%. The cash consideration alone, excluding the value of the NSR, on a per share basis is equal to approximately CDN $0.46, as compared to the closing price of Coral’s common shares on June 20, 2016 on the TSX Venture Exchange of CDN $0.195.
Completion of the transaction is subject to customary closing conditions and various approvals. Coral’s board of directors unanimously determined that the transaction is in the best interests of the company and its shareholders and recommends that its shareholders vote in favour of the Transaction. The company has scheduled a general meeting of shareholders to be held on July 22, 2016 to consider the approval of the transaction.
The Robertson property includes the properties also known as the Core, Gold Ridge, Excluded and the RUF mining claims, but does not include the properties known as the Norma, Sass, Eagle and JDN mining claims, which will remain the property of Coral. The property covers about 8,480 acres and is comprised of 415 claims and nine patented claims. Consolidation of the ownership of the Robertson property will allow the project to benefit from Barrick’s Cortez operation.
Coral’s CEO, David Wolfin, said, “On behalf of Coral’s board of directors and management team, I am very pleased to announce this exciting transaction which creates immediate substantial value for Coral shareholders through the cash consideration and share reduction, in addition to the potential for long term value for shareholders through the NSR. Barrick, with its existing mines and infrastructure in the area and proven operational expertise, was always the ideal party to put Robertson into production. With this continued commercial relationship with Barrick through the NSR, Coral shareholders will have the opportunity to participate and benefit from expected future gold production at Robertson, additional resource growth potential at Robertson and will also have economic returns that will substantially improve if gold prices increase over Robertson’s mine life. Upon closing of this transaction, Coral will have a very strong balance sheet as compared to its very limited financial resources currently, which exposed its shareholders to significant dilution if Robertson was to be advanced in any meaningful way. In fact, as opposed to future potential dilution, and as a result of this Transaction, Coral’s basic shares outstanding will be reduced by 8.7%, preserving the value created for the benefit of the remaining Coral shareholders.”
Coral Gold Resources has a portfolio of strategically-located claim blocks along the Cortez gold trend in north-central Nevada, including the flagship Robertson property.