Azarga Metals Corp (CVE:AZR) announced Wednesday it has executed a US$3 million convertible loan agreement with Baker Steel Resources Trust Ltd (LSE:BSRT) with an aim to start the second major physical exploration phase at the Unkur copper-silver project in Russia during the 2019 field season.
The Canada-based resource group said the loan is US$3 million, with the first US$1 million expected to be drawn down within the next few days and the second advance of US$2 million drawable in four to six months time, however, may be drawn down earlier in certain circumstances.
Azarga intends to use the injection of funds to support a second-phase drilling and exploration programme, aimed at increasing resources at its wholly owned Unkur copper-silver project, in Russia.
"I'm very pleased to welcome Baker Steel as our partner for continued development of the Unkur Copper-Silver Project. We were very successful with our first round of exploration leading to a sizable maiden resource and we firmly believe we can transformationally grow the mineralized envelope from here in the now fully funded next phase," said chairman, Alex Molyneux.
The company also announced Trevor Steel, Managing Partner and Chief Investment Officer of Baker Steel Capital Managers LLP (BSCM) will, in connection with closing, be appointed to the Azarga's Board of Directors, subject to approval by the TSX Venture Exchange.
Under the terms of the deal, Baker Steel will invest via a four-year term 8% secured convertible loan.
Baker Steel will also receive share warrants and it will secure an option to acquire a net smelter royalty (of up to 2%) for US$5mln.
On completion of the transaction, Azarga has agreed to issue such number of warrants to Baker Steel as is equivalent to to US$1,714,285 converted into Canadian dollars using the Bank of Canada closing rate on the date prior to the issuance. Each warrant will exercisable for a period of two years for one common share of the company at a price per common share of C$0.17.
Unkur has strong potential
Azarga Metals acquired Unkur in eastern Russia, near the China-Russia border, in mid-2016 and then embarked on an initial exploration program.
A preliminary economic assessment filed in August of last year was positive, envisaging an eight-year mine life producing 13,200 tonnes of copper and 3.7 million ounces of silver per year and resulting in an estimated pre-tax net present value of US$206.3 million (post-tax US$147.5 million) and an internal rate of return (IRR) of 28.9%.
Azarga believes there is potential to at least double the size of the existing resource with a second-phase drilling program.
Shares of Azarga were at C$0.12 on Wednesday.
Contact Katie Lewis at [email protected]