First Mining Gold Corp (TSE: FF) (OTCQX: FFMGF) unveiled Thursday a US$22.5 million funding deal with shareholder First Majestic Silver Corp (TSE:FR), which will give it enough capital to advance its flagship Springpole gold project in Ontario through the pre-feasibility and environmental assessment stage.
First Majestic will pay the exploration group US$22.5 million in total for a 50% stream of the silver produced from Springpole over its life, the group said in a statement.
READ: First Mining Gold has big aspirations and an attractive resource base as it develops one of the largest open pit deposits in Canada
"This agreement is the result of a year-long process to explore non-dilutive financing alternatives with a number of different parties," said Dan Wilton, CEO of First Mining
"This silver stream sale leverages Springpole's potential by-product revenue, strengthens our balance sheet, and provides a less dilutive source of funding to support our continued advancement of one of the largest undeveloped open-pit gold deposits in North America."
Springpole covers 41,943 hectares in northwest Ontario, and is 110 km northeast of the famous Red Lake area.
It currently hosts 4.67 million ounces of gold in the indicated category and 0.23 million ounces in inferred. A preliminary economic assessment (PEA) in 2019 showed a pre-tax net present value (NPV) of C$1.23 billion and a 26% pre-tax internal rate of return (IRR) for its 12-year mine life.
The group said the deal increases its strategic relationship with First Majestic, which currently holds 2.3% of its shares and leaves Springpole 'substantially unencumbered' while maintaining robust potential cash costs and all-in sustaining costs.
First Mining can buy back 50% of the stream for US$22.5 million at any time before the start of commercial production. The consideration is to be paid in stages, with US$10 million on closing, made up of US$2.5 million in cash and US$7.5 million in shares.
Then US$7.5 million will be due upon First Mining publicly announcing the completion of a positive PFS, while US$5.5 million will be paid on the group receiving approval of a federal or provincial environmental assessment for the project.
As part of the deal, First Mining will issue 30 million share purchase warrants to First Majestic on closing. Each warrant will entitle First Majestic to buy one First Mining at share an exercise price of C$0.40 for five years.
Shares in Toronto added nearly 4.5% to C$0.35 each.
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