- Red 5 (RED) divests its interests in Philippine-based Greenstone Resources, including the Siana Gold Project, to TVI Resource Development (TVIRD)
- The company suspended mining operations at Siana back in 2017 following delays in obtaining required government approvals
- TVI will pay RED roughly $25.8 million, as well as a net smelter return royalty of 3.25 per cent for up to 619,000 ounces of gold once production restarts
- The divestment allows RED to focus on its Western Australian gold portfolio
- Red 5 shares are up by 2.7 per cent to 19 cents each at 12:26 pm AEST
Australian gold miner Red 5 (RED) has penned a binding agreement with TVI Resource Development (TVIRD) to divest its interests in Greenstone Resources.
Based in the Philippines, Greenstone holds the Siana and Mapawa gold projects, which are also located in the South East Asian country.
Notably, Red 5 suspended mining operations at Siana back in 2017 following delays in securing regulatory approvals required to construct a tailings storage facility.
Four years on, RED’s strategic divestment of the asset is aimed at enabling the company to focus on its King of the Hills and Darlot gold mines in Western Australia, in a bid to become a mid-tier Australian gold producer.
On the other hand, TVIRD is an affiliate of Canada’s TVI Pacific and owns two operating mines, as well as a number of other development projects in the Philippines, with interests in gold, nickel and copper.
The divestment will see Red 5 handover 100 per cent ownership of Greenstone to TVI, including the processing plant and all infrastructure at Siana, for US$19 million (A$25.8 million).
TVI will also pay RED a net smelter return royalty of 3.25 per cent for up to 619,000 ounces of gold, with a future face value estimated at US$36 million (A$48.9 million), based on a set gold price.
This royalty will be payable from first production of gold at Siana following the restart of operations, targeted in the first half of 2023.
To this end, TVIRD intends to source funding required to restart the processing plant from existing operating cash flows and potentially debt funding.
Commenting on the divestment, Red 5 Managing Director Mark Williams said the company had successfully pivoted its focus to Australia.
“We are now well established on our growth trajectory in the Australian gold sector with the construction of the King of the Hills gold mine now in full swing and first gold production on track for the June quarter of 2022, complementing our nearby existing production base at Darlot,” he said.
“From a Red 5 perspective, the transaction streamlines our portfolio, removes the annual holding cost of approximately A$6 million and crystallises a combination of cash value for our shareholders while maintaining future exposure to the upside at Siana via a capped net smelter return royalty of 3.25 per cent.”
The Managing Director added he was confident in TVI’s ability to build on the strong foundations laid at Siana and bring the mine back into production.
The parties are progressing towards completion of the agreement with the satisfaction of regulatory approvals anticipated in the September quarter.
Red 5 shares were up by 2.7 per cent, trading at 19 cents each at 12:26 pm AEST.