The company said the revised terms provided mutual commercial benefits for it and the purchaser - Consolidated Mining & Civil (CMC) and Benagerie Gold and Copper (BGC).
These include accelerated payments to Havilah and greater flexibility for CMC and BGC.
HAV permitting obligations eliminated
As well as the accelerated upfront payments, the revised terms also eliminate Havilah’s permitting obligations with respect to the Benagerie lease, which is west of Broken Hill.
In return for these payments and recognising that the lease is now being divested as a not fully permitted project and hence of less value, the sale price has been reduced by about $2.1 million.
This is net of permitting costs which Havilah will no longer be required to incur.
At a value of $12 million, Havilah said the divestment still represented fair value when compared to other transactions for similar projects with the same level of permitting.
The Benagerie lease comprises the Portia and North Portia projects.
A “win-win outcome”
Havilah’s CEO Walter Richards said: “We view the revised North Portia divestment terms as a win-win outcome for both parties.
“Under the revised arrangement, neither party is tied to the other with respect to cash flow planning or investment and operating decisions.
“Havilah still receives a fair sale price and is now relieved of the permitting obligations, which will allow it to focus on the other projects in its ‘Copper Strategy – Enhanced by Cobalt’.
CMC and MGC managing director Steve Radford said: “The whole BGC and CMC team are pleased to continue and strengthen their working relationship with Havilah as we move forward into the future.”
Reduced royalty of 1.5%
Metallurgical results for North Portia and updated economic modelling indicate that it would be challenging for Havilah to raise the project development capital required for the development of North Portia.
Accordingly, in recognition of the challenges presented by this project, Havilah has agreed to accept a reduced royalty of 1.5% from CMC for metal sales from the Benagerie lease. This was previously 2%.
The parties have also agreed to enter into an exploration agreement for the licence area (EL5873) that surrounds the mining lease.
This is geared towards CMC identifying mineralisation that could supplement feed to the North Portia plant, thus allowing CMC an opportunity to potentially increase the scale of the operation.
Richards added: “The exploration agreement on EL5873 is likely to accelerate exploration and enhance the prospects of discovery success in which Havilah can participate, while still retaining its key exploration rights.
“For Havilah, the certainty over immediate and accelerated cash flow was an important consideration in agreeing to revise the divestment terms,” he said.
CMC “now also mineral explorers”
CMC’s Radford said: “The opportunity for Portia to be the hub for processing and operational support for potential new mineral targets within the EL is very exciting.
“We are always looking at ways to add value and improve the economics of our business and by building on this alliance with Havilah for the long-term benefit of both the companies, their employees, Broken Hill and regional communities is what we do.
“Our group of companies are general contractors, miners and now also mineral explorers.”