Erin Ventures Inc. announce it has entered into a strategic partnership option agreement with a London based commodity investment specialist, for the continuing development of Erin’s Piskanja Borate Project in Serbia. Under the terms of the Agreement, the InvestCo has the right to make equity investments in two tranches, totaling USD $20.135 million, with the proceeds to be used for the advancement of Piskanja towards production, subject to TSX Venture Exchange and shareholder approval.
The InvestCo is currently engaged as an integral part of the initial public offering process of a substantial mining complex. Due to the sensitive nature and timing of this listing process, Erin is unable to divulge the InvestCo’s identity at this time. A description of the InvestCo operations is found below. InvestCo’s identity will be released by way of, (i) a news release from Erin if, as and when InvestCo notifies Erin that there is no longer a process requiring InvestCo to remain confidential, and/or (ii) in an Information Circular to Erin’s shareholders as a part of the approval process if, as and when the InvestCo notifies Erin of its intent to exercise its Tranche 1 option, as described below.
Piskanja is Erin’s wholly-owned high-grade boron deposit with an indicated mineral resource of 7.8 million tonnes (averaging 31 per cent B2O3), and an inferred resource of 3.4 million tonnes (averaging 28.6 per cent B2O3), calculated in accordance with the Canadian Institute of Mining Definition Standards on Mineral Resources and Reserves as disclosed in Erin’s report titled, “Mineral Resource Estimate Update On The Piskanja Borate Project, Serbia, October 2016” which is filed on SEDAR.
“I am very excited by this development,” said Tim Daniels, President of Erin Ventures. “This agreement provides an opportunity to significantly grow our shareholders’ value by creating a funding plan which matches our development milestones, allowing for the rapid advancement of our boron project, first to a feasibility study stage, and then into mine development and construction. In addition, we are building a formidable team that combines Erin’s mineral exploration and mine development expertise and extensive knowledge of Serbia, with InvestCo’s marketing, logistics and finance expertise as an experienced global commodity trader that specializes in complex, niche commodities.”
The Agreement contains three principal commercial elements:
The InvestCo will be granted an initial purchase option exercisable for USD $5.135 million to acquire EITHER: (i) an equity interest in Erin’s wholly owned subsidiary, Balkan Gold d.o.o. , which holds all of Erin’s rights in Piskanja; OR (ii) equity in Erin, based upon a fixed pricing formula further described below . In either case, the proceeds are to be used exclusively to fund a pre-agreed work program at Piskanja designed to advance the project to a definitive feasibility study stage, as well as all permitting activities through to obtaining the requisite licenses, and approvals to exploit and mine Piskanja;
Subject to completion of Option 1, InvestCo will be granted a second purchase option to acquire USD $15 million worth of equity in Balkan Gold. The proceeds from Option 2 are to be designated for mine development and construction costs at Piskanja upon receipt of requisite licenses, and approvals to exploit and mine Piskanja; and
Subject to completion of Option 1, InvestCo, in its capacity as an experienced global commodity marketing and trading company, will provide its marketing and advisory expertise to Balkan Gold for the future sale of all borate production at Piskanja for a 3-year period.
The salient terms in the Agreement are as follows:
The InvestCo shall be granted Option 1 with an exercise period commencing immediately and expiring within 90 days of the Republic of Serbia Ministry of Mining and Energy issuing an extension to the current Piskanja exploration license, which is due for renewal by July 11, 2018;
Option 1 grants InvestCo the right, for USD $5.135 million, to purchase EITHER: (A) 51% of the share capital of Balkan Gold at the date the Option is exercised; Or (B) USD $5,135,000.00 of common shares in Erin. Each share to be priced at the maximum discount permissible under the policies of the TSXV, subject to: the price being fixed at the close of trading (Toronto time) on the day which InvestCo gives written notice to Erin of its intent to exercise this option, with the price to be pegged as the higher of either the volume weighted 20 previous trading-day average trading price of Erin’s shares on the TSXV, or the closing price on the day notice is given;
Upon exercise of Option 1 into equity of Balkan Gold, the InvestCo will be granted majority representation on the board of directors of Balkan Gold, or alternatively, upon exercise of Option 1 into equity of Erin, InvestCo will be granted the right to nominate a majority of the board of directors of Balkan Gold and Erin. Under either scenario, if InvestCo’s equity ownership falls below 40% at any point, then InvestCo’s board nomination rights shall be reduced proportionally;
The use of proceeds of Option 1 will be used solely to fund development and permitting activities of Piskanja through to obtaining all the necessary licenses, permits, and approvals to exploit and mine the Piskanja Borate Project. This will include funding a pre-agreed work program to extend the Piskanja Borate Project exploration license, and to fund the Piskanja Borate Project definitive feasibility study, including the funding of the general and administrative costs of Erin, and Balkan Gold, that directly relate to the Piskanja Borate Project only;
Upon exercise of Option 1, Erin shall reimburse InvestCo for all verified transaction closing costs associated with the transaction to a maximum of USD $300,000;
Upon exercise of Option 1, Erin and Balkan Gold shall grant InvestCo with sole marketing rights to all products produced from the Piskanja Boron Project, or any future borate project developed by Balkan Gold. The marketing agreement shall be valid through to the third anniversary of commissioning of Piskanja. The InvestCo will be paid one (1) percent of the invoice amount as a marketing fee, and reimbursed for pre-agreed costs;
Subject to completion of Option 1, InvestCo shall be granted Option 2 with an exercise period starting immediately and expiring the earlier of: A) ninety (90) days after (i) the date on which Erin receives all the necessary licenses, permits, and approvals required for the development and exploitation of the Piskanja Borate Project, including but not limited to the issuance of the exploitation license in accordance with mining law official gazette 101/2015, the approval of mining works, and the approval of the definitive feasibility study of the Piskanja Borate Project by the Republic of Serbia Ministry of Mining and Energy; and (ii) the date on which an expression of interest is obtained from a reputable financial institution, or reputable offtaker, for the financing of the debt portion of construction capex associated with the Piskanja Borate Project; OR B) one hundred and fifty (150) days after the date on which the Company receives all the necessary licenses, permits, and approvals required for the development and exploitation of the Piskanja Borate Project, including but not limited to the issuance of the exploitation license in accordance with mining law official gazette 101/2015, the approval of mining works; and the approval of the definitive feasibility study of the Piskanja Borate Project by the Republic of Serbia Ministry of Mining and Energy.
Option 2 allows InvestCo the right, for USD $15 million, to purchase an additional 24% equity stake in Balkan Gold; and
The proceeds from the exercise of Option 2 shall be used exclusively to fund future Piskanja mine design, development and construction costs based upon results derived from the definitive feasibility study, mine plans and other studies that formed the basis for the granting of the exploitation license by the Serbian authorities.
The Agreement is subject to TSX Venture Exchange, and shareholder approvals.