Northern Vertex Mining Corp. [NEE-TSXV; NHVCF-OTC] said Thursday December 6 that it has signed a definitive US$20 million silver streaming agreement with Maverix Metals Inc. [X-TSXV; MACIF-OTC] and has arranged a concurrent fully financed private placement that will generate US$8 million for the company.
Greenstone Resources 11 LP, one of the company’s shareholders, has agreed, subject to the satisfaction of certain conditions, to subscribe for the majority of the private placement.
Northern Vertex shares advanced on the news, rising 1.92% or $0.005 to 26.5 cents. The 52-week range is 70 cents and 22 cents.
The junior recently announced the first gold pour at its 100%-owned Moss gold-silver mine in western Arizona that the company has been fast-tracking. This was after its partner Sprott Private Resource Lending LP agreed to provide up to USA$100 million in acquisition and development funding as well as a CAD$2 million private placement.
By deploying low-cost heap leaching recovery methods, Northern Vertex is expecting the Moss Mine to produce 45,000 ounces of gold equivalent during the first five years of production. Annual cash flow is projected at US$24 million and will be used to fund expansion and acquisitions.
With a forecast IRR (after tax) of 48%, the project benefits from robust economics. A projected all-in sustaining cash cost of US$603 should make the Moss Project highly profitable at a gold price of US$1,267.68 an ounce (December 21, 2017), a scenario that offers investors protection in the event of a fall in the price of gold.
The company is led by CEO Ken Berry, an experienced financier who has outlined a strategy that aims to leverage the company’s strong balance sheet, production, cashflow, and financial partnerships to elevate Nothern Vertex to mid-tier gold producer status, generating over 200,000 ounces of gold production annually.
He plans to achieve that goal via a process of consolidation using the Moss Mine as a springboard.
Under the agreement announced on Thursday, Maverix will make a US$20 million up-front payment to a Northern Vertex subsidiary. In return, Northern Vertex has agreed to sell to Maverix 100% of the payable silver production from the Moss Mine on or after October 1, 2018, at a continuing payment price per ounce equal to 20% of the then applicable silver spot price.
Payable silver, in respect of each delivery of concentrate to an offtaker, will be a number of silver ounces equal to the greater of:
- The silver ounces in such delivery, multiplied by 98% and, (2) the gold price in such delivery multiplied by 98%, multiplied by 8.5% for deliveries until December 31, 2027, and multiplied by six for deliveries thereafter.
After the purchase by Maverix of an aggregate 3.5 million ounces of silver, the amount of payable silver purchased under the streaming agreement will be reduced by 50% of production for the remaining life of the mine.
Meanwhile, Northern Vertex has entered into binding subscription agreements for an US$8 million private placement under which the company will issue units at a price of 24 cents per unit. Each until will consist of one common share of the company and one common share purchase warrant. Each warrant will be exercisable for two years from issuance, allowing the holder to acquire an additional share at an exercise price of 40 cents per share.
It is expected that the private placement will close concurrently with the closing under the streaming agreement. However, the company intends to leave the private placement open for a period of 30 days and will accept up to a further US$2 million of additional subscriptions.
Greenstone, which holds a 28% stake in Northern Vertex, has agreed to subscribe for US$4.5 million worth of the units.
Proceeds of the silver streaming agreement and the private placement will be used to fully repay the company’s senior secured credit facility with Sprott Private Resource Lending LP. Proceeds will also be used to repay certain debts owed to Greenstone, and to fund the continued ramp-up at the Moss Mine.