Calidus in Warrawoona royalty buy-up | Ralph-Lauren

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ASX-listed gold producer in waiting, Calidus Resources has bought out another royalty tied to its developing Warrawoona gold project in WA’s East Pilbara region that it says will help boost cash flows from the new mining and processing operation.

The Perth-based company sewed up the 1.25 per cent profit royalty on the granted mining leases at Warrawoona for $45,000 cash and the issue of 750,000 Calidus shares to the private holders. The purchase leaves one remaining 1.25 per cent profit royalty attached to the same tenements.

The purchase of this life-of-mine royalty not only generates additional cash flow for the company but reduces the amount of time required to administer the royalty allowing more focus on the core aspects of production. The parties associated with the royalty have a long association with Warrawoona and we welcome them as shareholders to Calidus.

The company last month acquired and removed a 2.5 per cent net smelter return royalty over the Warrawoona tenements for a consideration of 4 million Calidus shares to the vendors, who were the original vendors of the tenements.

Calidus this week completed its share purchase plan, or “SPP” for eligible existing shareholders, taking the total capital raised from the SPP and the recent heavily oversubscribed share placement to institutional and sophisticated investors to approximately $34.57 million before costs.

Once the new shares from the equity raises and the latest royalty acquisition are factored in, the company will still have a fairly tight expanded capital structure of 342.2 million shares.

Calidus also recently bedded down debt financing to the tune of $110 million with Macquarie Bank for the planned $120 million stand-alone Warrawoona gold mining and processing operation. The $120 million is the pre-production CAPEX estimate for the development, while the after-tax net present value for the project has been calculated at $286 million and internal rate of return at 69 per cent after tax.

Based on the company’s definitive feasibility study, or “DFS” released last year, Warrawoona is forecast to produce a total of 658,277 ounces of gold over an initial life of mine of 8.3 years, with production averaging 90,000 ounces per annum over the first seven years.

The under-construction Pilbara gold mine, which is located about 25 kilometres south-east of Marble Bar, is tipped to spit out free cash flows after tax of $447 million or $53.8 million a year and average EBITDA at $110 million per annum, assuming a received gold price of $2,500 an ounce.

All-in sustaining costs of production at Warrawoona are expected to average $1,290 an ounce and the capital payback for the project has been estimated at just 13 months.

First gold is slated to be poured in the 2021-22 financial year, with the main construction phase ramping up in earnest during the current quarter.

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