REG - Greatland Gold PLC - Option for 5% Havieron JV interest set at US$60m

Greatland GoldAnnouncement

21/07/2022 07:16

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RNS Number : 2688T  Greatland Gold PLC  21 July 2022

21 July 2022
 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK
MARKET ABUSE REGULATIONS. ON PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY
INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC
DOMAIN.

 

Greatland Gold plc
("Greatland" or "the Company")

 

Option for additional 5% Havieron JV interest set at US$60m

 

Outcome represents a substantial uplift at over five-times compared

to the price implied by the October 2021 Pre-Feasibility Study

 

Further to the announcements on 21 December 2021 and 28 April 2022, Greatland
Gold plc (AIM:GGP) is pleased to announce that the process for determining the
option price for the 5% joint venture interest under the Havieron Joint
Venture Agreement (JVA) has been finalised. This has resulted in an option
price of US$60m at which Newcrest Mining Limited (Newcrest) can acquire an
additional 5% interest in the Havieron Joint Venture from Greatland.

 

Price determination

§ Option price represents a 5.3-times or around US$1 billion increase in
value in Havieron when compared to the NPV implied by the 2021 Stage 1
Pre-Feasibility Study (PFS) covering part of the South-East Crescent issued in
October 2021

§ This substantial increase at over five-times was achieved notwithstanding
the option price being determined as at 15 December 2021, only 64 days after
release of the PFS

§ The significant uplift was built on Greatland's updated Mineral Resource
and Ore Reserve estimate which, when compared to the October 2021 PFS Mineral
Resource and Ore Reserve estimate, represented an increase in total gold
content of 53% and 50% respectively. The updated estimates by Greatland were
based on a December 2021 drilling information cut off and were independently
confirmed ahead of announcement by Greatland on 3 March 2022

§ Pursuant to the JVA, Newcrest has 30 business days to exercise this option
and, if exercised, Greatland will be in the enviable position of being
debt-free with a world-class, low cost and long-life project which, subject to
a positive decision to mine, will move towards first production

 

Highly prescriptive JVA process and principles

§ Determination of the option price of US$60m as at December 2021 was in
accordance with the highly prescriptive process and principles agreed in the
March 2019 Havieron Farm-In Agreement and November 2020 Havieron JVA and, as
such, does not in Greatland's view represent a true market value for Havieron.
This included a prescribed process where an adjudicator had a binary choice
between the option prices proposed by each of the two parties, and therefore
was not permitted to independently determine a different option price. The JVA
included a number of valuation principles, including in respect of commodity
prices, which Greatland considers materially impacted its ability to advocate
for a higher option price

§ Furthermore, given the option price was determined as at 15 December 2021,
only geological data available up to that date could be considered. The option
price does not take into account the subsequent growth drilling and
development progress at Havieron since that date

§ The significant uplift over the two-month period demonstrates the value
creation trajectory of Havieron, with the expanded Feasibility Study remaining
on track for the December 2022 quarter, the future potential to define the
bulk mine zonations and continued benefit from the ongoing growth drilling to
deliver exploration success

 

Looking ahead

§ Havieron has significant growth potential with the full size and scale of
this high-grade gold and copper orebody continuity still to be delineated

§ In Newcrest, Greatland has an experienced global-major, as a joint venture
partner and operator of the Havieron project

§ Greatland and Newcrest are working together to accelerate the development
of the project and maximise its future value

§ Feasibility Study remains on track for December 2022 quarter with an
expected rapid pathway to commercial production

§ Management is confident that Havieron represents a world-class, low-cost
development being fast-tracked to production through leveraging the existing
Telfer infrastructure

§ The combination of gold and copper diversifies Greatland's revenue with
Havieron expected to be a lowest quartile cost asset

 

Shaun Day, Managing Director of Greatland Gold plc, commented:

"Greatland has delivered a tremendous result in delivering a value uplift of
over five-times when compared to the Stage 1 PFS which was released just two
months before the option pricing date. To achieve this uplift is testament to
the strength of the technical and commercial teams that we have built here at
Greatland as well as the relentless growth of Havieron.

"Earlier this year, Greatland delivered a 53% increase to the JORC Mineral
Resource and an updated mine plan, supporting a 50% increase to the JORC Ore
Reserve, which formed the foundation of shifting the paradigm to achieve the
uplift in the option price to around US$1 billion above the price implied by
the limited Stage 1 PFS on the South-East Crescent.

"Looking ahead, Greatland looks forward to working to realise the tremendous
opportunity at Havieron to develop a low risk, low capex and world class
gold-copper mine. The substantial uplift demonstrates the value creation
trajectory of Havieron is exceptional with an upcoming expanded Feasibility
Study, the future potential to define the bulk mine zonations and the
continued benefit from the ongoing growth drilling to deliver exploration
success.

"We are focused on delivering Havieron into production and are excited to
unlock its growing potential. As we move beyond this stage of Havieron, we can
turn our focus onto our tremendous portfolio of assets which provide the
potential to create substantial additional value from exploration success."

 

Background to Havieron and Joint Venture Agreement with Newcrest

The Havieron copper-gold project is operated by Newcrest under a JVA with
Greatland. Newcrest holds a joint venture interest of 70% (30% Greatland).
The JVA provides Newcrest with an option to acquire a further 5% at a price
determined by a prescribed process. If the option is exercised, Newcrest will
be entitled to an overall joint venture interest of 75% (Greatland 25%).

 

Under the terms of the JVA, the option price has been determined by a highly
prescriptive process, including being based only on drilling data up to 15
December 2021 and using long term estimates of commodity prices (which are
significantly below prevailing market prices). In particular, the adjudicator
had a binary choice between the option prices put forward by the two parties,
and therefore was not permitted to determine its own independent view on the
option price. Accordingly, it was not in the Company's view designed to
achieve a true market value.

 

Higher offer

In March 2022, Greatland submitted a non-binding offer to Newcrest to acquire
a 5% stake in Havieron for a substantially higher value than determined as the
option price.   Greatland did so because it considered the value of Havieron
to be well above the value implied by the option price and would, in the
opinion of the directors, still have presented a financially compelling
outcome to Greatland shareholders.  Newcrest did not engage on this offer.

 

Use of funds

Subject to Newcrest exercising its option, the proceeds will be used by
Greatland to repay in full its existing US$50m debt facility and become
debt-free. This facility was a valuable source of funds used to finance early
work construction of the exploration decline and growth drilling programme
from December 2020 to June 2022 and this repayment allows Greatland to
de-leverage its balance sheet.

 

Havieron growth continues

This option price determination reveals that Havieron's growth continues with
a 5.3-times uplift in value to a NPV of US$1,200m (100% basis) as at December
2021 when compared to the Stage 1 PFS NPV of US$228m released only two months
prior(1). This comparison has been made against the Newcrest released Stage 1
PFS NPV, as this NPV also did not incorporate the prevailing spot market
commodity prices. The Stage 1 PFS was based on a Mineral Resource estimate
with a drilling information cut-off date of February 2021 and the mining of
Ore Reserves.

 

Since the PFS, Greatland has announced, on 3 March 2022, an updated Mineral
Resource estimate at Havieron demonstrating +50% growth to 6.5 million Oz
AuEq, based on a drilling information cut-off date of 2 December 2021, and has
developed a mine plan that incorporated this additional Mineral Resource to
deliver an expanded Ore Reserve. These updates were used by Greatland to
advocate for an improved option price.

 

The updated Mineral Resource estimate formed part of Greatland's thorough
preparation, which combined the Company's in-house capabilities with the
sourcing of external submissions including:

§ Stuart Masters (Resource Competent Person; former JORC Executive Member,
AusIMM)

§ Entech (Reserve mine planning)

§ SRK Consulting (Resource and Reserve review and technical advisory)

§ PricewaterhouseCoopers Securities Ltd (financial advisory)

§ Sternship Advisors (corporate advisory)

§ Omnia (team led by Neville Power for corporate and technical advisory)

§ Senior Counsel (JVA interpretation)

Collectively, this preparation allowed Greatland to successfully shift the
paradigm to achieve the significant uplift in the option price above that
implied by the limited Stage 1 PFS on the South-East Crescent, in
circumstances where the PFS had only been published approximately two months
prior to the option price determination date.

 

Competent Persons' Statements for JORC 2012 Mineral Resources and Ore Reserves

The information in this document that relates to the Mineral Resources and Ore
Reserves for Havieron is extracted from the RNS announcement titled "Updated
Mineral Resource substantially increases Havieron Resource and Reserve"
released on 3 March 2022, and available on Greatland's website. The Company
confirms that it is not aware of any new information or data that materially
affects the Mineral Resources and Ore Reserves for Havieron in the original
RNS announcement.

 

Forward Looking Statements

This document includes forward looking statements and forward looking
information within the meaning of securities laws of applicable jurisdictions.
Forward looking statements can generally be identified by the use of words
such as "may", "will", "expect", "intend", "plan", "estimate", "anticipate",
"believe", "continue", "objectives", "targets", "outlook" and "guidance", or
other similar words and may include, without limitation, statements regarding
estimated reserves and resources, certain plans, strategies, aspirations and
objectives of management, anticipated production, study or construction dates,
expected costs, cash flow or production outputs and anticipated productive
lives of projects and mines.

 

These forward looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual results, performance and
achievements or industry results to differ materially from any future results,
performance or achievements, or industry results, expressed or implied by
these forward-looking statements. Relevant factors may include, but are not
limited to, changes in commodity prices, foreign exchange fluctuations and
general economic conditions, increased costs and demand for production inputs,
the speculative nature of exploration and project development, including the
risks of obtaining necessary licences and permits and diminishing quantities
or grades of reserves, political and social risks, changes to the regulatory
framework within which Greatland operates or may in the future operate,
environmental conditions including extreme weather conditions, recruitment and
retention of personnel, industrial relations issues and litigation.

 

Forward looking statements are based on assumptions as to the financial,
market, regulatory and other relevant environments that will exist and affect
Greatland's business and operations in the future. Greatland does not give any
assurance that the assumptions will prove to be correct. There may be other
factors that could cause actual results or events not to be as anticipated,
and many events are beyond the reasonable control of Greatland. Readers are
cautioned not to place undue reliance on forward looking statements,
particularly in the current economic climate with the significant volatility,
uncertainty and disruption caused by the COVID-19 pandemic. Forward looking
statements in this document speak only at the date of issue. Greatland does
not undertake any obligation to update or revise any of the forward looking
statements or to advise of any change in assumptions on which any such
statement is based.

 

 

(1) See the Company's RNS announcement dated 12 October 2021 - Havieron
South-East Crescent - Pre-Feasibility Study release for details of the
Newcrest released Stage 1 PFS and the key parameters of the PFS and economic
assumptions used.

Enquiries:

 

 Greatland Gold PLC                                                        +44 (0)20 3709 4900

 Shaun Day                                                                 info@greatlandgold.com (mailto:info@greatlandgold.com)

                                                                           www.greatlandgold.com (http://www.greatlandgold.com)

 SPARK Advisory Partners Limited (Nominated Adviser)                       +44 (0)20 3368 3550

 Andrew Emmott/James Keeshan

 Berenberg (Joint Corporate Broker and Financial Adviser)                  +44 (0)20 3207 7800

 Matthew Armitt/Jennifer Lee/Jack Botros

 Canaccord Genuity (Joint Corporate Broker and Financial Adviser)          +44 (0)20 7523 8000

 James Asensio/Patrick Dolaghan

 Hannam & Partners (Joint Corporate Broker and Financial Adviser)          +44 (0)20 7907 8500

 Andrew Chubb/Matt Hasson/Jay Ashfield

 SI Capital Limited (Joint Broker)                                         +44 (0)14 8341 3500

 Nick Emerson/Sam Lomanto

 Luther Pendragon (Media and Investor Relations)                           +44 (0)20 7618 9100

 Harry Chathli/Alexis Gore

 

Notes for Editors:

 

Greatland Gold plc (AIM:GGP) is a mining development and exploration company
with a focus on precious and base metals. The Company's flagship asset is the
world class Havieron gold-copper deposit in the Paterson region of Western
Australia, discovered by Greatland and presently under development in Joint
Venture with Newcrest Mining Ltd.

 

Havieron is located approximately 45km east of Newcrest's Telfer gold mine
and, subject to positive decision to mine, will leverage the existing
infrastructure and processing plant to significantly reduce the project's
capital expenditure and carbon impact for a low-risk and low-cost pathway to
development.

 

Construction of the box cut and decline to develop the Havieron deposit
commenced in February 2021. An extensive growth drilling programme is
presently underway at Havieron with a view to further expanding the
understanding and scale of the ore body.

 

Greatland has a proven track record of discovery and exploration success. It
is pursuing the next generation of tier-one mineral deposits by applying
advanced exploration techniques in under-explored regions. The Company is
focused on safe, low-risk jurisdictions and is strategically positioned in the
highly prospective Paterson region. Greatland has a total six projects across
Australia with a focus on becoming a multi-commodity mining company of
significant scale.

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