Theta Gold jumps 15% in lunchtime trades on $110m term sheet with metals giant Sprott

Theta Gold Mines (ASX:TGM) shares have shot up 15% heading into lunchtime trades as the market digests news international metals trading giant Sprott has taken an interest in Theta’s South Africa based ‘TGEM’ Gold Project. 

The level of interest Sprott is taking is not one to be ignored: the trader is committing $110m to Theta in early-stage agreements to fund the development of Theta’s project; a sum which reflects 90% of the initial funding required. 

Currently, the agreement is not legally binding, meaning it is not guaranteed to go ahead.

Worth noting is that the $110m is contingent on a due diligence process which is already underway on Sprott’s end as it probes Theta’s books and operations. 

Should Sprott be satisfied in the legitimacy of its proposed investment, it will move ahead to a legally binding term sheet agreement with Theta. That due diligence process will cover “technical, legal, and environmental and social” considerations. 

What is the TGEM Gold Project? 

Theta’s South African gold play boasts a total mine resource of over 1.2Moz of gold with an expected yearly output of 160,000oz to be achieved within five years. 

Under the (non-binding) agreement executed today, Theta will deliver to Sprott up to 100,000oz of gold over the life of mine, with Sprott paying 10% of the gold price per ounce delivered under the term sheet. 

In the lead up to production, under the agreement, Theta will pay Sprott in cash or scrip on a “semi-annual basis, 9.5% per annum interest.”

The company also notes it "has the option to buy-back 50% of the stream based on a pre-agreed price, following which Theta will deliver 2% of the ongoing gold production."

Theta expects to have moved towards a stronger agreement by the end of first quarter 2023; Theta is retaining NSW-based debt specialists Kamara Group as financing advisors. 

Term sheet the ideal solution: Management 

“This deal is a much more cashflow friendly style of financing compared to a straight debt finance,” Theta executive chair Bill Guy said. 

“It is less risky to a start-up project where the unique repayment mechanism provides the Company the flexibility to manage its cashflow as long as the minimum gold delivery requirements are met.” 

“Once the Sprott funding is closed, the company may commit to further upgrading our Ore Reserve base, as well as to potentially further expand our total mineral resource in order to increase production scale.”

“Theta recently published a definitive Feasibility Study for the project demonstrating robust economics,” Guy added. 

Theta Gold Mines' three month charts show a boost in shareholder sentiment today

Note: an earlier verison of this article incorrectly quoted an expected yearly output of 16,000oz; the correct figure is 160,000oz