Lupaka Gold (LPK.V) has announced it has completed six months of negotiations with Pandion Mine Finance and the company has now signed and executed a definitive pre-paid gold purchasing agreement.
As per the agreement, Lupaka will receive US$6.1M from Pandion in two tranches (of $1.8M and $4.3M) and these funds will be used to complete the development of the Invicta mine and to upgrade the access roads to ensure the ore from Invicta can easily reach the mill where it will be processed. Both tranches will be subject to a 15 month grace period (5 quarters) where after Lupaka will have to deliver 19,530 ounces of gold to Pandion. Lupaka will receive a variable payment for these ounces defined as ‘the market price minus a fixed discount’. As the terms of that discount have not been announced (yet), the final impact on the future cash flows remains unknown, but we will seek additional clarification from the company to fine-tune our expectations.
The US$6.1M should be sufficient to get Invicta up and running again at the intended production rate of 350 tonnes per day using third party owned processing plants, but Lupaka Gold intends to acquire or build its own processing plant to improve the economics and efficiencies at Invicta. Pandion seems to be supporting the company all the way as this first agreement also includes the potential to get an additional $6-12M in funding which could then be used by Lupaka to build its own plant.
Lupaka can now really start to focus on becoming a producer and the fact someone is willing to fork over $6.1M in cash shows Lupaka’s mine plan is quite robust as you can be sure Pandion has vetted it thoroughly.