On April 4, 2022, South Star Battery Metals Corp. entered into a definitive metals purchase and sale agreement with Sprott Private Resource Streaming and Royalty (B) Corp. in respect of the Santa Cruz Graphite Project in Brazil.
Pursuant to the agreement, Sprott will make an upfront payment of US$10 million for the phase 1 stream, and a further payment of between US$9 million to US$18 million for the phase 2 stream, for a total cash consideration of up to US$28 million.
The phase 1 stream is applicable on sales and delivery of the first 6,000 tonnes per annum of graphite concentrates and 15% of all graphite concentrates greater than 6,000 tonnes per annum (“Phase 1 Stream Production”). The phase 1 stream applies to 21.875% of the Phase 1 Stream Production until a total sale and delivery of 75,000 tonnes of concentrate has been achieved, at which point the phase 1 stream will be reduced to 10.9375%. Sprott will pay South Star 20% of the per tonne sales price for Phase 1 Stream Production. The phase 1 stream is subject to satisfaction of conditions precedent, including a minimum equity raise of CAD$6 million (the “Equity Financing”). In connection with the phase 1 stream, South Star will issue Sprott 6,000,000 warrants with an exercise price that represents a 35% premium to the offering unit price of the Equity Financing.
The phase 2 stream is applicable on sales and delivery of 85% of all graphite concentrates greater than 6,000 tonnes per annum (“Phase 2 Stream Production”). The phase 2 stream will apply to up to 20% of the Phase 2 Stream Production (the “Phase 2 Stream Percentage”). South Star has the option of a reduced phase 2 draw request of a minimum of US$9 million with the Phase 2 Stream Percentage reduced pro rata, provided there is viable alternative project financing available for the balance. Sprott will pay South Star 20% of the per tonne sales price for Phase 2 Stream Production. South Star has the option to buy back up to 100% of the phase 2 stream based on a agreed multiplier depending on the timing of such buyback. The phase 2 stream is subject to satisfaction of conditions precedent.
South Star and Sprott have also entered into a US$2 million bridge loan with a term of 6 months, to be repaid with proceeds from the phase 1 consideration.
Cassels acted for South Star.