Bluebird Merchant Ventures Ltd. announced that it has signed a USD 5 million Farm-out Agreement for its high grade Gubong Gold Project in South Korea. Details: Gubong is the larger of two 100% owned gold mining projects in South Korea. It was historically the second largest gold mine in South Korea and the Korea Resources Corporation estimated 2.34Mt at some 6 g/t Au garnered from 57 drill holes over 17,715.3m.
It is an orogenic deposit, which typically have a depth of 2km compared to the current depth of 500m. The Company believes it has a potential resource of +1Moz Au in-situ, plus an estimated additional 300,000 oz Au from satellite ore bodies. Having completed extensive analysis of the historic data, it aims to bring the Project into production with a medium-term target of 60,000 oz Au per annum rising to 100,000 oz Au.
Under the terms of the Agreement, the South Korean’s will form an SPV for the investment that will facilitate Gubong’s development,investing up to USD 5 million in return for a maximum 60% of the Project. The South Korean JV partner is aconsortium of successful South Korean business professionals with a broad range of expertise, including metal trading. TheCompany has been working informally with the consortium to assess the most favourable path to advance Gubong, with the resultant JV structure considered the most optimal option to achieve success.
The Farm-out is over three stages with milestones needed to be achieved for the grant of equity in the JV. In the first and second stages, the JV will aim to obtain the relevant permits relating to bringing Gubong back into production (such as the Mountain Temporary Use Permit – MTUP) and once received prepare a Development Report, which details the planned development of taking Gubong into production. In the third stage, the JV will execute this report and carry out other exploration and production related activities including but not limited to sampling, drilling, trenching, dewatering, permitting, mapping, surveys, technical studies (including the Development Report, environmental studies, acquiring land, feasibility studies and/or studies of resources and reserves) and governmental or local stakeholder liaison.
The expenditure milestones by the investor giving a total of 60% of the Project are as follows: Stage 1 Shares: USD 250,000 or 3% of the JV; Stage 2 Shares: USD 750,000 or 9% of the JV; Stage 3 Shares: USD 4,000,000 or 48% of the JV. The investor can also elect to fast-track expenditure at its discretion. Bluebird shall not be required to contribute to the costs of the JV/Gubong development up to the completion of Stage 3, providing the Company with a free carry to production.
Both parties realise the potential of Gubong with the Farm-Out representing a major endorsement of the Project’s potential and underpins the joint belief that the relevant permits will be obtained, and that the mine has strong potential to be a bought back into production. The value of Gubong and the Kochang Gold and Silver mine, the smaller of the Company’s South Korean projects, was highlighted in a Scoping Study, which included a post-tax NPV of USD 181 million, free cash of USD 50 million per annum, an IRR of 111% and a USD 630 per oz All in Sustaining Cost (AISC). The study was conducted on a USD 1,750 per oz Au price compared to the current price of c.USD 2,300 per oz.
