Diamante strikes royalty deal with Molejon mine master contractor

TORONTO (miningweekly.com) – US minerals explorer Diamante Minerals has concluded negotiations with Molejon mine owner Petaquilla Gold for royalties on gold produced at the Panama-based mine.

The explorer agreed to a 12.5% royalty for 12 months on 1 000 oz a month, and a further 5% royalty on every ounce produced above that threshold.

Petaquilla Gold had engaged master contractor Blendcore to act as operator to restart processing stockpiled ore at the mine, which is why Diamante agreed that the royalty would vest after it had completed, according to a Securities Exchange Commission filing, a $250 000 bridge loan to Blendcore, which would be disbursed in three tranches.

Under the terms of the agreement the loan would be forgiven, provided that Blendcore produced at least 12 000 oz of gold during the 12-month period. Diamante specified that a portion of the stockpiled minerals had been collateralised against the bridge funding.

"We look forward to working with Blendcore, the master contractor, in restarting one processing line of the plant at the Molejon gold mine. Our partners indicate that the plant should achieve monthly production of 1 000 oz of gold within months. The streaming agreement sees Diamante receiving a minimum of the equivalent of 1 500 oz of gold which, at the present gold price of $1 100/oz, is valued at $1.65-million, less the cost of sales,” stated Diamante president Chad Ulansky.

The minerals explorer also had the option to extend the royalty for an additional 12-month period on the same terms as the initial loan, once the initial loan had been satisfied.

For as long as the royalty agreement was in force, Diamante would also have the ‘right of first option’ on the project to provide additional funding to Blendcore for the expansion, development and exploration of the mine. This right would survive the royalty agreement by one year.

Production at Molejon started in 2009, with an initial throughput of 2 200 t/d. In 2012, the plant was expanded to 3 500 t/d, resulting in gold equivalent output of 69 000 oz/y in 2012 and again in 2013, before closing late in that year.

Petaquilla had run into cash-flow problems after failing to close a $210-million debt offering during a period when Inmet Mining (now owned by First Quantum Minerals) attempted a hostile takeover of the company. According to media reports, Petaquilla subsequently failed to pay salaries and benefits to about 600 employees in 2013, which led to investigations by Panamanian authorities.

Petaquilla’s TSX-listed stock had also been delisted after it failed to meet continued listing requirements, in particular, to file its financial statements for the 13 months ended July 31, 2014.

According to a 2011 National Instrument 43-101-compliant technical report, the Molejon mine, which lay a stone-throw away from First Quantum's 4.4-million-ounce Cobre Panama project, had proven and probable mineral reserves of 643 266 oz of gold and certain additional mineralised material.

Beyond the royalty stream in Panama, Diamante was focused on acquiring its initial 20% interest in the Batovi diamond project, located to the north of Paranatinga, in Mato Grosso, Brazil.