Colossus and Sandstorm Agree to a US$75 Million Long-Term Precious Metal Sale Transaction
- Attractive source of capital: The transaction provides a non-dilutive source of capital by selling 35% of payable platinum and palladium production and a small portion (1.5%) of payable gold production. Colossus will deliver all metals due under this agreement from its 75% of the Serra Pelada project.
- Fully funded for
construction and beyond: The
US$75 millionis in excess of the remaining funding required for the construction and ramp up of production at Serra Pelada. The excess funds provide a construction contingency and may also be used to advance the Company's regional exploration program or other value-enhancing activities.
- Third party validation: Partnering with Colossus demonstrates Sandstorm's confidence in Serra Pelada and its potential to deliver low cost production. Sandstorm completed significant due diligence on the property including a review of the geological and metallurgical work being used as the basis for construction of the mine and the substantial exploration potential that remains at Serra Pelada.
- Maintain significant commodity exposure: Under the terms of the Transaction Colossus and its shareholders maintain significant exposure to all precious metals produced from Serra Pelada, particularly gold.
Details of the Agreement
Sandstorm will provide a
US$75 million deposit to Colossus. In
return, Colossus will deliver to Sandstorm life-of-mine payable metal equal to
35% of the platinum, 35% of the palladium and 1.5% of the gold from Serra
Pelada. The percentages of payable metals to be sold by Colossus to Sandstorm
are calculated based on 100% of payable metals derived from production at Serra
Pelada; however, Colossus will deliver all metals due under this agreement from
its 75% of the Serra Pelada project.
Ongoing payment terms: In addition to the upfront deposit, Sandstorm will also pay to Colossus a purchase price equal to the lesser of
US$200 per ounce of platinum, US$100 per ounce of
palladium and US$400 per ounce of gold (subject to inflation
adjustments of 1% per year) and the prevailing market price. The balance of
production from Colossus' 75% of the Serra Pelada project, as well as
COOMIGASP's 25% portion of production, will be sold at prevailing market prices.
Buy-back option: Colossus has the right to purchase up to 50% of Sandstorm's obligation to purchase metals for
million. Colossus may exercise this option either as a single purchase
or in 10% increments until April 1, 2015.
Other terms and conditions: Colossus has guaranteed certain minimum annual deliveries for the initial 10 year period, commencing in 2013. In addition, Colossus has agreed to refund a pro-rata portion of the upfront deposit in the event that Serra Pelada does not achieve a completion test within 48 months of funding. Colossus' obligations under the agreement will be secured by Colossus' interest in its principal subsidiaries as well as by certain assets of Colossus Mineração Ltda. ("Colossus Brazil"). The amount so secured will be limited to
$10 million until Colossus' outstanding senior
unsecured gold linked notes have been repaid. In addition, Colossus has
guaranteed the performance by Colossus Brazil of its obligations under the
agreement with Sandstorm. Future royalty arrangements or similar metal sales
agreements by Colossus or its subsidiaries involving Serra Pelada are subject to
rights of first refusal or consent rights in favour of Sandstorm. The agreement
also contains other terms and conditions, including customary representations,
warranties, covenants and events of default. The initial term of the contract is
40 years, subject to successive 10-year renewals at the discretion of Sandstorm.
Funding of the deposit by Sandstorm is expected to occur today.
Colossus' financial advisor for this transaction was
L.P. and its legal advisor was Davies Ward Phillips & Vineberg
Colossus is a development-stage mining company focused on bringing its Serra Pelada project into production. Serra Pelada, located in the mineral prolific Carajas region in the State of Pará,
Brazil, is host to one of the highest grade gold
and platinum group metals deposits in the world. Between 1980 and 1986 Serra
Pelada was host to the largest precious metals rush in Latin American history.
Coverage of this famous mining rush by 60 Minutes can be viewed by following the
link below. Colossus Minerals
shares, warrants and notes trade on the Toronto Stock Exchange (TSX)
under the symbols CSI, CSI.WT.A and CSI.NT respectively and in the United States its Common
Shares trade on the OTCQX under the symbol COLUF. The Company is headquartered