APPLECROSS,
Australia, June 28,
2023 /CNW/ - Hot Chili Limited (ASX: HCH) (TSXV: HCH)
(OTCQX: HHLKF) ("Hot Chili" or "Company") is pleased to announce
the execution of a binding US$15
million Investment Agreement with Osisko Gold Royalties Ltd
("Osisko") for a 1.0% Net Smelter Return (NSR) royalty on copper
and a 3% NSR royalty on gold (the "Osisko NSR") (the "Investment")
across the Company's Costa Fuego Copper-Gold Project ("the
Project") located 600 km north of Santiago, at low elevation (<1,000 m) in the coastal range of the Atacama
Region, Chile.
Completion of the Investment ("Closing") is
expected within coming weeks, subject to satisfaction of customary
conditions, with Hot Chili to receive US$15
million ("Royalty Consideration") at Closing.
Highlights
- Significant investment by Osisko provides strong
endorsement from one of North
America's leading royalty-streaming groups, and will boost
Hot Chili's cash position to approximately A$26 million upon Closing
- US$15 million in funds for
growth and development with
the investment (Royalty Consideration) to be used to
advance the Costa Fuego Pre-Feasibility Studies (PFS), resource
growth drilling programmes and for the general advancement of the
Project
- Clear "look-through" value given the Osisko NSR is
equivalent to a 1.12% CuEq1 NSR royalty
across payable metals for US$15 million
and Hot Chili's
current market capitalisation is US$80 million
- Buyback rights if a change of control event
occurs prior
to the fourth anniversary of Closing. The
Osisko NSR can be reduced to 0.5% NSR royalty on copper and 2.5%
NSR royalty on gold
-
Osisko to have a Right of First Offer (ROFO) with
respect to the sale of any future
royalty, stream, or similar interests by Hot Chili
- Preliminary Economic Assessment (PEA) for Costa Fuego
confirms strong economics2
- 30,000m drill programme set to
commence, following Closing
Hot Chili's Managing Director Mr
Christian Easterday
commented, "The investment agreement is yet another
strong endorsement and follows extensive due diligence of the
Company and its Costa Fuego copper-gold project by Osisko, renowned
for their technical rigour and capabilities.
We consider that the Osisko
investment will deliver a strong outcome
for our shareholders by significantly
strengthening our treasury without the dilution
of a share issuance, while only adding
a minor incremental royalty burden to Costa
Fuego.
1 CuEq considers
assumed commodity prices and average
metallurgical recoveries from test work.
See qualifying statements below.
|
2 See announcement 'Hot
Chili Announces PEA for Costa
Fuego' dated 28 June 2023
|
Importantly, Osisko's
involvement alongside Glencore's strategic shareholding in Hot Chili
demonstrates Costa Fuego's global
relevance and the projects' potential to deliver near-term, meaningful, new copper
supply.
We are pleased with the outcomes
of our recently announced PEA, which has been validated by Osisko's
investment. We look forward to the commencement of drilling
activities across multiple growth targets and the completion of our
PFS for Costa Fuego next year."
Hot Chili's financial advisor is National Bank
Financial Inc., and its Canadian legal counsel is Bennett Jones
LLP.
Summary of Material Terms
of Investment Agreement
The Investment Agreement between Hot Chili
Limited, its Chilean subsidiaries holding title to the properties
comprising the Costa Fuego Project (each a Seller), and
Osisko Gold Royalties Ltd (Osisko), provides for the
purchase by Osisko of a royalty from each Seller, the material
terms of which are summarised below:
Royalty Consideration
|
Total cash
consideration to Hot Chili and the Sellers in the amount of
US$15,000,000
(Royalty Consideration), payable at closing of the
investment (Closing).
|
Use of Proceeds
|
The majority of the
Royalty Consideration to be used for exploration, development
and general advancement of the Project. The balance may be used for
general
working capital purposes.
|
Royalty Interest
|
A net smelter return
royalty with respect to a Seller's share of copper and gold
production from the Project (Royalty) comprising 1.0% of
payable copper production
and 3.0% of payable gold production.
|
Royalty Calculation
|
The Royalty payable
monthly with payments based on net smelter return revenues
generated by the Project. Deductions applicable against the royalty
are those typical
in a net smelter return calculation but exclude taxes and
government royalties.
|
Project
|
The Costa Fuego
Project properties and all associated assets and undertakings
of
any kind (Project).
|
ROFO
|
Osisko to have a Right
of First Offer (ROFO) with respect to the sale of any future
royalty, stream, or similar interests by Hot Chili.
|
Buyback
|
If a Change of Control
Event occurs prior to the 4th anniversary of Closing, the
Seller
shall be entitled to reduce the Royalty percentage such that the
resulting royalty rate
applicable on payable copper becomes 0.5% and the royalty rate
applicable on
payable gold becomes 2.5% in exchange for a payment to Osisko in an
amount as follows:
i. 130% of the Royalty
Consideration if exercised prior to the 2nd anniversary
of
Closing;
ii.
140% of the Royalty
Consideration if exercised between the 2nd and 3rd
anniversary of
Closing; and
iii.
150% of the Royalty
Consideration if exercised between the 3rd and 4th
anniversary of
Closing.
A "Change of Control Event" occurs when
control (meaning over 50% of the voting
securities) and decision-making power
of either the Hot Chili or Seller
is acquired by
another party.
|
Royalty Security
|
The Royalty will be
secured against all property, assets, undertaking and rights of
each Seller, including the Project.
In connection with any
construction financing for the Project, Osisko has agreed to
principals under which it would subordinate its security interests
to encumbrances
granted under a senior bank loan
facility, subject to customary terms
and conditions
|
Conditions to Closing
|
Closing is subject to
satisfaction of conditions considered customary for royalty
finance investment agreements, including execution of security
documents.
|
The Directors look forward to an exciting
period ahead. Further
details of the Company's next steps are
expected to be announced shortly.
This announcement is authorised by the Board of Directors
for release to ASX and TSXV.
Hot Chili's
Managing Director and Chief Executive
Officer Mr Christian Easterday is responsible
for this announcement and has provided sign-off for release to the
ASX and TSXV.
For more information please contact:
Christian Easterday
Managing Director – Hot
Chili
|
Tel: +61 8
9315 9009
Email:
admin@hotchili.net.au
|
Penelope Beattie
Company Secretary – Hot
Chili
|
Tel: +61 8
9315 9009
Email:
admin@hotchili.net.au
|
Harbor Access
Investor & Public
Relations (Canada)
|
Email:
Graham.Farrell@harbor-access.com
Email:
jonathan.paterson@harbor-access.com
|
or visit Hot Chili's website at www.hotchili.net.au
Qualifying Statements
Forward Looking Statements
This
document contains certain "forward-looking statements" and
"forward-looking information" concerning the business, operations
and financial performance and condition of Company. Forward-looking
statements and forward-looking information include, but are not
limited to, statements with respect to permitting and legal
processes in relation to mining permitting and approvals; estimated
production and mine life of the various mineral projects of the
Company; the ability to obtain permits for operations; synergies;
the realisation of mineral
resource estimates; the benefits of the development potential of the properties of the Company;
the future price of minerals, including gold, copper, and
silver; the estimation of mineral reserves and resources; success
of exploration activities; and currency exchange rate fluctuations.
Except for statements of historical fact relating to the Company,
certain information
contained herein constitutes forward-looking statements. Forward-looking statements are frequently characterised by words
such as "plan," "expect," "project," "intend," "believe,"
"anticipate", "estimate" and other similar words, or statements
that certain events or conditions "may", "should" or "will" occur.
Forward-looking statements are based on the opinions and estimates
of the Company at
the date the statements are made and are based
on a number of assumptions
and subject to a variety of risks and uncertainties and
other factors that could cause actual events or results to differ
materially from those projected in the forward-looking statements.
Many of these assumptions are based on factors and events that are not within the control of the Company
and there is no assurance they will prove to be
correct.
Factors that could cause actual results to vary
materially from results anticipated by such forward-looking
statements include the results of the PEA and planned PFS, as well
as future economic studies, the results of the planned 30,000m drill programme and
their impact on mineral
resources and the economic studies,
variations in ore grade or recovery rates,
changes in market conditions, risks relating to the
availability and timeliness of permitting and governmental
approvals; risks relating to international operations, fluctuating
metal prices and currency exchange rates, changes in project
parameters, the possibility of project cost overruns or
unanticipated costs and expenses, labour
disputes and other risks
of the mining industry, failure
of plant, equipment or processes to operate as
anticipated.
The Company cautions that the foregoing list of
important factors is not exhaustive. Investors and others who base
themselves on forward-looking statements should carefully consider
the above factors as well as the uncertainties they represent and
the risk they entail and are cautioned not to place undue
reliance on forward-looking statements. The Company believes that
the expectations
reflected in those forward-looking statements are reasonable, but no assurance
can be given that these expectations will prove to be
correct and such forward-looking statements included in this press release
should not be unduly relied
upon. These statements speak only as of the date of
this press release.
Although the Company
has attempted to identify important
factors that could cause actual actions,
events or results to differ materially from those
described in forward-looking statements, there may be other factors
that cause actions, events or results not to be anticipated,
estimated or intended. There can be no assurance that
forward-looking statements will prove to be accurate, as actual
results and future events could differ materially from those anticipated in such statements. The Company undertakes no obligation to
update forward-looking statements if circumstances or the Company's
estimates or opinions should change except as required by
applicable securities laws. Any comparative market information is
as of a date prior to the date of this document.
Disclaimer
Neither the TSX Venture
Exchange nor its Regulation Services Provider (as that term is
defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this news
release
This document (the "Document") is to be used by
the recipient for informational purposes only and does not purport
to be complete or contain all the information that may be material
to the current or future business, operations, financial condition,
or prospects of
Hot Chili Limited ("Hot Chili" or the "Company"). Each recipient should perform its own independent investigation and analysis
of Hot Chili, and the information contained in this Document
is not a substitute therefore. Hot Chili makes no representation or
warranty, express or implied, as to the accuracy or completeness of
the information contained in this Document or in any other written
or oral communication transmitted to any recipient by any party.
Except for liability which cannot be disclaimed by law, by
accepting this Document, the recipient agrees
that neither Hot Chili nor any of its officers, directors, employees, or
representatives has any liability for any representations
or warranties, express or implied, contained in, or for any
omissions from, this Document or any such other written or oral
communication from any person.
Certain information contained
herein is based on, or derived from, information provided
by independent third-party sources. Hot Chili
believes that such information is accurate and that
the sources from which it has been obtained are reliable;
however, Hot Ch ili has not independently verified such
information and does not assume any responsibility for the accuracy
or completeness of such information.
This Document should not
be considered as a recommendation from any person to
purchase any securities. Each person for whom this Document is made
available should consult its own professional advisors in making
its own independent investigations and
assessment and, after
making such independent investigations
and assessments, as it deems
necessary, in determining whether to proceed with
any investment in the Company.
Copper-equivalent (CuEq)
Copper-equivalent (CuEq)
net smelter return royalties for all metals, from all production
sources were estimated to match the combined revenues (net of
selling costs) anticipated from copper and gold, based on the
Company's latest technical information. Revenues considered the
combined contribution of estimated processing feed and used
long-term commodity prices of: Copper
US$ 3.85/lb, Gold US$ 1,750/oz, Molybdenum US$ 15/lb, and Silver US$21/oz;
and estimated metallurgical recoveries for the
production feed to the following processes: Concentrator (87% Cu,
56% Au, 37% Ag, 58% Mo), Oxide Leach (55% Cu only), & Low-grade
Sulphide Leach (40% Cu only).
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SOURCE Hot Chili Limited