If finalized, the deal will see Resolute sell its 100 percent stake in the operation to private equity firm EMR Capital for as much as AU$300 million.
After months working to expand capacity at the Ravenswood gold mine in Australia, Resolute Mining (ASX:RSG,LSE:RSG,OTC Pink:RMGGF) has announced it is in talks to offload the asset.
The news comes as little surprise to the sector, with media reports noting that the international miner has been trying to find a buyer for the Queensland operation for quite some time.
If finalized, the deal will see Resolute sell its 100 percent stake in the asset to private equity firm EMR Capital for as much as AU$300 million.
EMR Capital is a multinational investment company focused on obtaining producing or near-production assets in four sectors: gold, copper, hard coking coal and potash.
The two Australian companies are currently in private talks that are contractually bound with an exclusivity deed that expires on Wednesday (January 15).
“Negotiations between Resolute and EMR Capital are significantly advanced on a transaction involving the sale of Ravenswood to EMR Capital and its partners for total proceeds of up to AU$300 million,” reads an announcement.
The multimillion dollar asking price is comprised of AU$100 million upfront, and an additional AU$200 million in deferred consideration. The AU$200 million would be contingent on future gold price outcomes, forthcoming production thresholds from the Ravenswood expansion project and the investment outcomes from Ravenswood for EMR Capital.
The Australian dollar gold price has performed exceedingly well over the last few weeks, reaching a high of AU$2,350 per ounce on January 8.
The price slipped to its week low late on Monday (January 13) as news hit that a phase one trade deal between China and the US could be reached. However, the metal regained some of its losses early on Tuesday (January 14) to start the day trading at AU$2,241.
The precarious nature of geopolitical relations in the Middle East has bolstered investor appetite for safe haven commodities since the beginning of the year, especially precious metals like gold and palladium.
The added attention the international gold market has garnered this month makes it an opportune time for Resolute to pen a deal for Ravenswood.
The large-scale proven producer is now transitioning from underground to open-pit mining, and has multiple open pits that would allow for the mine to be scaled up. According to a fact sheet, Ravenswood has a mine life of over 10 years with an estimated mineral resource of 5.9 million ounces.
In 2019, the mine contributed 54,486 ounces to Resolute’s total yearly production numbers thanks to efforts made to boost output.
“The completion of Stage 1 of the Ravenswood expansion project has increased processing capacity at Ravenswood to 5 million tonnes per annum enabling a production target for FY20 to be set at 80,000 ounces of gold at an all-in sustaining cost of US$1,200 per ounce,” states the company’s year-end report, released Monday.
Resolute has no plans for any non-sustaining capital expenditures on Ravenswood in 2020.
Shares of the gold miner were down 5.9 percent on Tuesday, trading for AU$1.17.
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.