Ora Banda Mining Ltd (ASX:OBM) has executed a binding joint venture and farm-in agreement with Brenahan Exploration Pty Ltd (BEPL), a subsidiary of Wesfarmers (ASX:WES), selling 65% of its non-core mineral rights on the Davyhurst tenement package for a cash consideration of A$26 million along with a 2% royalty.
In this 65%/35% JV, BEPL reserves the right to solely fund A$15 million in exploration over the next three years, thereby increasing its stake to 80%.
Ora Banda is free carried from discovery until the completion of a definitive feasibility study (DFS) over the relevant area.
Furthermore, upon completion of each DFS, BEPL will have the option to purchase Ora Banda's remaining JV interest in that particular DFS area.
Ora Banda retains all rights to gold minerals over the entire OBM tenement package and maintains exclusive access over current and planned gold mining areas
High-calibre strategic partner
Ora Banda managing director Luke Creagh said: “The Davyhurst tenement package is very large and has never had any sustained or modern exploration programs given its disjointed and under-capitalised historical ownership.
“Although we have had encouraging early-stage lithium results, Ora Banda is a gold-focused company and given the underexplored nature and size of this belt, we expect it would take many years to do it justice for other minerals.
“We are very excited by this transaction as WesCEF is a high calibre strategic partner who has the technical expertise and capability to unlock the belt for minerals that are non-core to Ora Banda.
“The WesCEF team that will work on this tenement package has a track record of success as they discovered and are helping deliver the Mt Holland Lithium Project.
“In total, we view this as a 45 million dollar deal with $30 million in cash and $15 million in exploration expenditure.
“The deal structure is aligned to maximise the potential of multiple discoveries to the benefit of both parties, whilst providing balance sheet strength to Ora Banda to further grow gold production.
“We are looking forward to working collaboratively with the WesCEF team to unlock significant value for our respective shareholders on this highly prospective and underexplored tenement package.”
Tenement Map of Davyhurst Project.
Key terms
Areas that are outside any DFS area will remain in the exploration JV, with exploration solely funded by BEPL up to any further completed DFS.
$22.1 million cash consideration is payable by BEPL upfront upon completion and the remaining $3.9 million cash consideration is payable upon earlier of the execution of formal mineral sharing, JV and royalty agreements or 30 April 2024.
The BEPL transaction is subject to conditions precedent and is anticipated to be completed in the first quarter of 2024.
Hawke’s point transaction
To increase the total consideration to $30 million, Ora Banda has agreed to effectively onsell 1.5% of the 2% royalty to be received from BEPL to Hawke’s Point Holdings for $4 million.
It is proposed that the Hawke’s Point Transaction will be implemented by a variation to the existing royalty deed between Ora Banda and Hawke’s Point as announced to incorporate the New HP Royalty.
The $4 million will be payable in cash or offset against amounts owing under the existing $11 million unsecured loan facility with Hawke’s Point at Hawke’s Point’s election, which will provide further funding to grow the company’s gold production and reduce its debt profile.