B2Gold (TSX: BTO; NYSE-AM: BTG) is selling its 81% stake in the Kiaka gold project in Burkina Faso to Australia’s West African Resources (ASX: WAF) for cash and shares.
Kiaka is within 40 km of West African Resources’ Sanbrado gold mine, which poured its first gold in March 2020.
“West Africa continues to be a hot bed of M&A,” Craig Stanley of Raymond James commented in a research note. “In less than three years, we count eight producers/mines and ten pre-production companies/projects that have been acquired in the region.” Stanley,a mining analyst who covers Orezone Gold (TSXV: ORE), also noted that Kiaka is 50 km south of Orezone’s Bombore gold project.
In May, B2Gold said it was updating Kiaka’s existing feasibility study due to the potential for improved economics resulting from lower fuel prices, alternative power options and a higher gold price, and said it expected to complete the updated feasibility study by mid-2021. In a corporate presentation in September, B2Gold stated it was continuing “to review optimization opportunities and ways to unlock the value of the project for its shareholders.”
Under the sales agreement for Kiaka with West African Resources for Kiaka, B2Gold will receive $450,000 in cash, and once the transaction closes, a further $45 million—50% in cash and 50% in shares of West African Resources.
Another $45 million will be due in cash or shares on either the commencement of project construction or the completion of a feasibility study. In addition, a 2.7% net smelter return (NSR) royalty will due on the first 2.5 million oz. gold produced from Kiaka, and a 0.45% NSR on the next 1.5 million ounces produced.
The company has also completed an amended purchase agreement with West African Resources for its 90% stake in the Toega project, also in Burkina Faso, and about 14 km west of the Sanbrado mine. In that deal, B2Gold will receive $18 million (it has already received $9 million of that sum), and a 2.7% NSR on the first 1.5 million oz. gold produced at Toega until it has received $22.5 million. After that, B2Gold will receive a 0.45% NSR interest on the project. (B2Gold reached an agreement to sell Toega in the second quarter of last year.)
“West African Resources has a strong reputation of being a solid operator in Burkina Faso and with its existing local infrastructure and operating experience is well positioned to move the Kiaka project forward in a timely and cost-effective manner,” B2Gold’s president and CEO, Clive Johnson, said in a news release. “B2Gold, through the WAF shares it will receive as part of the consideration, and royalties on both the Kiaka and Toega projects, will continue to benefit from the future development of the projects.”
B2Gold owns producing gold mines in Mali, Namibia and the Philippines, and exploration and development projects in Mali, Colombia, Finland and Uzbekistan.
(This article first appeared in The Northern Miner)