Hot Chili Announces US$15 Million Investment Agreement with Osisko Gold Royalties APPLECROSS, Australia ,
Hot Chili Announces US$15 Million Investment Agreement with
Osisko Gold Royalties
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% CuEq
1
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 economics
2
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 2
nd
anniversary of
Closing;
ii.
140% of the Royalty Consideration if exercised between the 2
nd
and 3
rd
anniversary of Closing; and
iii.
150% of the Royalty Consideration if exercised between the 3
rd
and 4
th
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:
Penelope Beattie
Company Secretary – Hot Chili
Tel:
+61
8
9315
9009
Email:
Harbor Access
Investor & Public Relations (Canada)
Email:
Email:
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
View original content:
http://www.newswire.ca/en/releases/archive/June2023/28/c7578.html
%SEDAR: 00053528E
CO: Hot Chili Limited
CNW 10:32e 28-JUN-23