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in advancing several early greenfield
developments.
Regulus is setting up a new company
called Aldebaran Resources, in which
all six of the company’s Argentine
assets will be held. Regulus intends
listing Aldebaran on the Toronto Stock
Exchange, so it will be a public entity. The
majority shareholder in Aldebaran has
committed USD30-million for the further
development of the Altar Project. As part
of the transaction consideration, Sibanye-
Stillwater will receive 19.9% equity
holding in Aldebaran. Aldebaran will also
pay Sibanye-Stillwater USD15-million in
cash for the option to earn into Altar.
From the funding received from the
major shareholder, Aldebaran will have
an initial USD30-million to spend on
exploration and development. “Once
they have spent USD30-million at Altar,
they would earn 60% of the equity of
our project, so effectively it becomes
a JV between Sibanye-Stillwater and
Aldebaran,” explains Stewart.
After spending these funds, Aldebaran
then has the option to spend another
USD25-million, earn a further 20%, and
increase their shareholding to 80% (so
they could spend up to USD55-million in
total for 80% of the company). There are,
of course, time limits in which they need
to complete their exploration. The first
USD30-million, or 60%, must be spent
within five years and the USD25-million
after that within three years if they want to
get to 80% — that is the basic construct of
the agreement.
Benefits of the transaction
“The benefits for Sibanye-Stillwater is that
we get a holding of 19.9% in Aldebaran,
which not only gives us exposure to Altar
but also to other exploration projects in
the Aldebaran portfolio while retaining
an initial 40% direct interest in Altar
while it is taken further up the value
curve. In addition, Aldebaran pays us
USD15-million upfront, effectively for
that option to earn in. If they don’t use
the first USD30-million in five years,
they walk away, and we own 100% of the
project again. So, they have to spend a
minimum of USD30-million to get their
equity portion,” Stewart explains.
If Aldebaran does spend the full
USD55-million within eight years,
they hold 80% in Altar and Sibanye-
Stillwater effectively holds 20% directly
in the JV, and a further 16% indirectly
through its shareholding in Aldebaran
(assuming the company retains its 20%
shareholding in Aldebaran).
“Once that is done, there are a lot of
trade-offs. If the exploration proves
successful, we have an option to sell the
project to a third party, in which case both
parties cash out. Alternatively, if the JV
or Sibanye-Stillwater wants to develop
Altar, we would have an option to, at that
point, take the project forward from a
development phase. In other words, in
five to eight years, Sibanye-Stillwater
will have an option to assess its strategy
and determine the optimal way forward
regarding the development of the copper
project in Argentina,” says Stewart.
When the deal was done earlier this year,
Sibanye-Stillwater CEO, Neal Froneman,
said: “This transaction is consistent with
our strategy of maintaining our focus and
investment on our core mining operations.
We believe Aldebaran possesses the
vision, skills, and experience to unlock
the considerable upside potential of the
Altar Project in which we will continue
to hold a meaningful interest. Consistent
with our vision, we believe this partnership
with Aldebaran will deliver value for
all stakeholders as the Altar Project is
progressed up the value curve.”
According to John Black, CEO and
a director of Regulus, the proposed
transaction creates a new, well-financed
company. “The deal will allow us to realise
value on Regulus’s Argentine assets and
participate in another major copper/gold
project. The Altar Project already has a
very large 43-101 copper-gold resource
and we see the potential to materially
enhance the value of the project through
further discovery and delineation of
higher-grade zones. The agreement with
Sibanye-Stillwater is designed to provide
immediate benefits to shareholders of
both companies, as well as exposure to
significant future upside potential from an
attractive portfolio of exploration projects,”
says Black.
Exploration can add value
Another big benefit of the deal for
Sibanye-Stillwater, is that over the next five
or eight years, the company does not have
to commit any further funding, or commit
any exploration expenditure, while they get
USD15-million upfront. The company does
not have any operational or management
responsibilities, which is handled by
Aldebaran, but at the same time, Sibanye-
Stillwater retains a lot of exposure to the
project and will have the option to develop
or sell the project in eight years.
Stewart says the Altar Project is high up
in the Andes mountains, so there is quite a
limited exploration season. “You can only
really do exploration over a period of about
five to six months, typically from October/
November to March/April,” says Stewart.
According to Stewart, the operational
risks in Argentina is similar to any other
South American or African country
where there is an element of political risk.
“However, our experience in Argentina
to date has been excellent and the South
American region is well established in
terms of mining, and especially copper
mining,” says Stewart. Copper mines are a
big revenue earner in countries like Chile
and Peru.
“Argentina is a slightly higher-risk
country than your typical first-world
mining countries like the US, Australia,
or Canada, but certainly not a higher risk
than the African continent or even the
rest of the South American continent.
It is probably one of the better countries
if you are looking at these jurisdictions,”
says Stewart.
Marathon on the radar
Stewart says the Marathon Project is next
on Sibanye-Stillwater’s radar. “We are
in the process to determine how we will
realise value from this project. Marathon
is at an earlier stage and lower value than
the project in Argentina. In Argentina you
are also committed to spend exploration
funds; an owner cannot just sit back and
keep the project on hold,” says Stewart.
“However, at Marathon we are now going
through a similar process as we did in
Argentina. There has been keen interest in
the project in the past. We could possibly
look at a similar type of transaction here,”
adds Stewart.
Marathon is on the eastern margin
of the Coldwell Complex, a Proterozoic
layered intrusion. Since the Sibanye-
Stillwater deal, USD1.8-million was spent
to advance the project. During 2017, about
6 000m of diamond drilling tested three
target areas in search of feeder structures
and to test low sulphidation PGM
mineralisation. Although high-grade
feeders were not intercepted during 2017,
the results provide valuable information for
exploration vectoring.
Trails and surface trenches were also
extended and sampled during 2017 at th e
Boyer Lake area within the prospective
intrusive lithologsies of the Coldwell
Complex. In addition, minimum
environmental baseline data was collected
in 2017. Marathon has 151.7 million
tonnes at 0.22% copper and PGM 2E+Au
grade of 0.89g/t (730 million lb copper and
4.3Moz 2PGE+Au) declared resources as
at 31 December 2017. b
OCTOBER 2018 MINING MIRROR
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