Gold mining company Caldas Gold on Monday announced a streaming transaction with Toronto-listed Wheaton Precious Metals as a first step in securing the project financing required to expand operations and build Colombia’s “next major gold mine”.

TSX-V-listed Caldas said it entered into a nonbinding term sheet for $110-million pursuant to a precious metals purchase agreement to be entered into with Wheaton subsidiary Wheaton Precious Metals International (WPMI), the proceeds of which would be used to fund the expansion of mining operations in the Deeps Zone (MDZ) at the Marmato project.

“Given the due diligence undertaken by Wheaton, we believe the proposed streaming transaction validates the value we have identified in our Marmato project,” said Caldas chairperson and CEO Serafino Iacono.

Upon entering into the precious metals stream, WPMI will purchase 6.5% of the gold production and 100% of the silver production until 190 000 oz of gold and 2.15-million ounces silver have been delivered, after which the stream drops to 3.25% of the gold production and 50% of the silver production for the life-of-mine.

Under the proposed stream, WPMI will pay a total cash consideration of $110-million, $38-million of which is payable upon closing and the remaining portion of which is payable during the construction of the MDZ project at Marmato, subject to receipt of required permits and licences, sufficient financing having been obtained to cover total expected capital expenditures, and other customary conditions.

In addition, WPMI will make ongoing payments equal to 18% of the spot gold and silver price until the uncredited portion of the upfront payment is reduced to nil, and 22% of the spot gold and silver price thereafter.

Further, Caldas also announced a proposed $150-million offering. The company would, on a best efforts private placement basis, issue up to 150 000 units, consisting of $1 000 principal amount of senior secured gold-linked notes and a number of common share purchase warrants of the company to be determined based on market conditions. 

Concurrently, based on market conditions, Caldas is considering an equity financing on a best efforts private placement basis of up to C$50-million consisting of common shares and common share purchase warrants. Scotiabank and Canaccord Genuity would act as lead agents in connection with the offering and the equity financing.

The Marmato project comprises the existing producing underground gold and silver mine in the Upper Zone, the existing 1 200 t/d processing plant and the area encompassing the MDZ.

The 2019 preliminary economic assessment completed charts a path for expansion of mining operations at the Marmato project, ultimately comprising two distinct operations, the existing Upper Mine operation and the MDZ project, which sits directly below the Upper Zone vein system.

In 2019, the Upper Mine produced 25 750 oz of gold and 39 560 oz of silver. Implementation of a mine optimisation programme in the Upper Mine is expected to increase gold production starting in 2020 and reduce total cash costs per ounce.

A prefeasibility study, currently in process and expected to be completed mid-2020, is focused on the development of mining operations in the MDZ, including construction of an additional 4 000 t/d plant and new dry stack tailings storage facilities.

The net proceeds of the offering and any equity financing would be used for the expansion of the underground mining operations at its Marmato project, including development of the MDZ, construction of an additional processing plant and additional tailings storage facilities, and to escrow funds for the payment of interest during the first two years on the notes.