Highlights

  • Binding agreement to sell 80% of Leo Resources, holder of the Tengrela South permit.
  • Consideration of up to A$5.0 million cash plus a 1% NSR royalty.
  • A$2.5 million payable by completion, with up to A$2.3 million on permit renewal.
  • Proceeds to fund the Adzope Gold Project without a dilutive raising.

Desert Metals Limited (ASX:DM1) has signed a binding share sale agreement with Canadian-listed Waraba Gold Limited to sell its 80% interest in Leo Resources SARL. Leo Resources holds the Tengrela South gold exploration permit in northern Côte d'Ivoire, about 30 km south of Perseus Mining's Sissingué gold mine.

Deal Terms

Total consideration is up to A$5.0 million in cash plus a 1% net smelter return royalty. A$2.5 million is payable by completion, including a A$100,000 exclusivity fee already received, a A$500,000 deposit and a A$1.9 million completion payment.

A further payment of up to A$2.3 million is due on renewal of the permit, depending on the term and area renewed. Waraba can buy back the royalty at any time for A$2.2 million in cash or shares.

Conditions and Approvals

Completion is subject to waivers and consents from Ivorian partner Smart Mineral Explorer, which retains a 20% carried interest, and to Côte d'Ivoire ministerial approval for the change of control within six months of signing.

The transaction is non-dilutive, with no new Desert Metals shares to be issued, and does not require shareholder approval. Waraba is not a related party.

Focus on Adzope

Proceeds will fund Desert Metals' focus on the Adzope Gold Project in south-eastern Côte d'Ivoire, which spans three permits covering about 826 square kilometres. Plans include initial exploration of the Agboville gold-lithium project, new project acquisitions and working capital.

At the Nyan prospect, soil sampling has defined a gold-in-soil anomaly extending more than 7 km. Managing Director Stephen Ross described the sale as an excellent outcome for shareholders that removes the need for a dilutive capital raising.

Key Takeaways

  • Desert Metals is selling Tengrela South for up to A$5 million plus a royalty.
  • The sale avoids a dilutive capital raising.
  • Completion depends on partner consents and ministerial approval.
  • Funds will be directed to the Adzope Gold Project.