Globex Secures Attractive Cash & Share Deal With Excellon Resources
Globex Mining Enterprises Inc. (CA: GMX – $0.38 & US: GLBXF – $0.29 & GER: G1MN – €0.25) is proficient to acquire exceptional property holdings. The Company has frequently demonstrated its ability to do so at bargain price levels. Often this involves attractive projects secured cheaply through staking. Thereafter, Globex may arrange deals with other companies at a premium value that generate gains for the Company and its shareholders. After all, for a project generator with many irons in the fire, securing transactions to vend properties is a desired outcome.
This week, Globex announced that it is divesting its Bräunsdorf Silver project to Excellon Resources Inc. [CSE:EXN] through an option deal enabling the latter to earn 100% ownership of the project. The transaction involves a series of cash and share capital payment terms, structured over a three year period. There will also be a royalty grant to Globex at the conclusion of the option, and the potential for bonus payments with the achievement of significant milestones by Excellon.
Under the terms of the Agreement, to exercise the Option and earn a 100% interest in the Silver City Project, the Excellon must:
• Pay C$100,000 and issue 226,837 common shares of the Company (today worth approximately C$225,000) to Globex at signing (completed on September 23, 2019);
• Pay C$100,000 and issue Common Shares to Globex equivalent to C$325,000 on or before September 23, 2020;
• Pay C$100,000 and issue Common Shares to Globex equivalent to C$425,000 on or before September 23, 2021; and
• Pay C$200,000 and issue Common Shares to Globex equivalent to C$625,000 on or before September 23, 2022.
Note that the payments at signing and at the first anniversary are firm commitments totalling a value of $750,000, which is almost four times Globex’s investment at Bräunsdorf to date.
Over the 3-year term of this deal, the total cash payments amount to $500,000, while the total payment in Excellon shares issued to Globex is worth C$1.6 million.
In addition to this agreed payment schedule, a one-time bonus payment of $300,000 in cash is due to Globex upon the presentation of a maiden resource estimate for the project. If the property is advanced through to commercial production, a second bonus payment of $700,000 shall be payable to Globex.
Moreover, Excellon is obligated to continue with $500,000 in exploration commitments in the first year of this deal. Thereafter the value of the Bräunsdorf Silver project may increase through a successful outcome of work funded by Excellon.
Retained Gross Metals Royalty Commitment Upon Completion of Option Deal
After the payment terms and work commitment of this option agreement have been fulfilled, ownership of the Bräunsdorf Silver Project shall be transferred to Excellon. However, Globex shareholders will still hold leverage to the successful development of the project. A Gross Metals Royalty (GMR) will be retained for 3% of all precious metals production. A GMR of 2.5% will be retained for all other metals. The GMR leverage alone may amount to a significant value proposition to Globex shareholders.
Thereafter, Excellon may purchase 1% of the GMRs on both the precious metals and other metals by issuing payment of US$1.5 million to Globex. The GMR commitments will remain in perpetuity through any subsequent property transactions in the future.
Bräunsdorf Silver Project Presents Exceptional Development Opportunity
Excellon shall gain control of an advanced silver project with a historic production record spanning more than 750 years. The exploration potential is considered to be superb with numerous high-profile targets awaiting further work commitments. This potential was highlighted through initial work programs completed by Globex last year, following the acquisition of the project.
The enormous property area of land holdings comprising the Bräunsdorf Silver project spans some 164 square kilometers. Polymetallic vein systems have been identified on the property along a strike length of 36 kilometers. Historic mining activity rarely extended further than 200m below surface. Many of the established resource zones remain open for expansion to depth.
The project is located in Saxony Germany, in close proximity to the city of Freiberg. This is an established mining center, with access to supporting infrastructure. Excellon immediately rebranded the project as the Silver City property, perhaps in part due to this location. The nearby Freiberg University of Mining and Technology is the oldest such facility in the world. The rich historical mining tradition and exceptional infrastructure for this district will provide tangible advantages for Excellon as it embarks on further exploration work towards the potential development of a producing mine.
It appears that Globex and Excellon have achieved the elusive win-win transaction objective with this option deal. Both companies in this arrangement stand to benefit. For Excellon shareholders, this is an exciting acquisition that diversifies its operations and builds further leverage to silver exploration. The untapped exploration potential within the very large property area of the Bräunsdorf project is intriguing. Excellon has already demonstrated proven exploration success within its flagship La Platosa Project in Mexico.
Globex shall realize a substantial capital gain from the option deal. The cash portion of the payment schedule will provide Globex with additional funding. This in turn may be deployed towards creating further shareholder value to secure other projects in the future. The retained royalty component also represents attractive upside potential.
Meanwhile, the receipt of Excellon shares valued at $1.6 million during the full option term will build substantial ownership leverage. Globex may hold this share position as a strategic investment.
Bonus payments for the completion of a resource estimate, and the potential development to commercial production within any portion of the property, make this attractive deal even better. Globex may eventually collect a total of an additional $1 million in cash from these incentives.
The full cycle project generation is an illustration of the business model employed by Globex to create shareholder value. Management initially recognized the potential for the Bräunsdorf property. The project was strategically advanced to become more attractive for a transaction partner. Highly accretive terms have been set that will result in a net capital gain plus the potential for future upside.
This effective business model positions Globex as one of the best small cap stocks in the resource exploration sector. The Company remains well funded with a clean balance sheet and numerous attractive projects currently under exploration. Smallcaps Recommendation: BUY.
|Smallcaps.us Advice: Buy||Price Target: $2.10||Latest Company Report (pdf)|
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