Caldas Gold (TSXV: CGC.V) announced on Monday a $110 million streaming transaction with Wheaton Precious Metals (NYSE: WPM) to expand operations at the Marmato project in Colombia.
The proceeds will be used to fund the expansion of Caldas’ mining operations in the Deeps Zone, located in the Department of Caldas, the company said.
Under the agreement, Wheaton will purchase 6.5% of the gold production and 100% of the silver production until 190,000 ounces 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.
In 2019, the Upper Zone mine produced 25,750 ounces of gold
“Given the due diligence undertaken by Wheaton, we believe the proposed streaming transaction validates the value we have identified in our Marmato Project,” said Serafino Iacono, CEO of Caldas Gold in a media statement.
“The streaming transaction will help us to manage the overall leverage in our capital structure while improving flexibility and reducing financing costs and risks.”
“The strength and potential upside of this project was especially apparent during our onsite due diligence trip, prior to travel restrictions being put into place,” said Randy Smallwood, President and CEO of Wheaton in the joint statement.
Caldas Gold also announced the planned issuance of “units” – in the form of notes and share purchase warrants – to raise another $150 million to help fund the project.
Projected production
A Preliminary Economic Assessment (PEA) completed in 2019 charted a path for expansion of mining operations at the Marmato Project at the existing Upper Zone and at the Deeps Zone, which sits directly below the Upper Zone vein system.
In 2019, the Upper Zone mine produced 25,750 ounces of gold.
Implementation of a mine optimization program is expected to reduce total cash costs per ounce and to increase gold production in 2020 to between 32,000 and 37,000 ounces and thereafter to a range of 35,000 to 40,000 ozs for the next 15 years, according to Caldas Gold.
Midday Monday, Caldas’ stock was up 20% on the TSXV. The company has a C$121 million market capitalization.