Baru Gold Corp. and its subsidiary Pt Tambang Mas Sangihe have signed a non-binding letter of intent with Pt Arsari Tambang to become a strategic equity partner and investor.
Background of Pt Arsari Tambang
Pt Arsari Tambang is a wholly owned subsidiary of Arsari Group. Arsari Group is an Indonesian conglomerate with operations in renewable energy, agribusiness, mining, trading and logistics.
Pt Arsari Tambang is a leading fully integrated tin mining and processing company. Through its subsidiaries operating in Bangka Belitung, Pt Arsari Tambang explores, exploits, mines, process, smelts, refines, sells and exports tin. Pt Arsari Tambang's tin smelter has a production capacity of 1,200 tons per month, and its branded tin ingots are listed on the London Metal Exchange. Year-to-date export earnings from tin metal are in excess of 4,700 tons (approximate sales value $148-million (U.S.)).
Pt Arsari Tambang prides itself on responsible management, strong community engagement and development. All aspects of its operations are certified in accordance with the highest standards.
Partnership and investment agreement
Subject to satisfactory due diligence, Pt Arsari Tambang will acquire a 10-per-cent equity stake in Pt TMS from Pt TMS's existing shareholder, a private Indonesian corporation. The private corporation is and will remain an existing shareholder of Pt TMS. Baru Gold's 70-per-cent share in Pt TMS remains unchanged, and this 10-per-cent stake is non-dilutive to Baru Gold shareholders.
Pt TMS will grant to Pt Arsari Tambang a five-year option to subscribe for an additional 15-per-cent equity stake in Pt TMS. The option is exercisable until the fifth anniversary date from the date the company receives approval for a production operation status from the Indonesian Ministry of Energy and Mineral Resources. The option price is based on the valuation of Pt TMS at the time of the exercise. The valuation of Pt TMS will be determined by a TSX Venture Exchange-approved business and natural resource valuator. This estimate will be based on resource estimates from the company's two Sangihe National Instrument 43-101 reports from 2010 and 2017 and other geological evidence as may be required.
If the 15-per-cent option is fully exercised, Baru Gold's stake in Pt TMS will reduce from 70 per cent to 59.5 per cent. Although slightly dilutive to shareholders, Baru Gold will continue to hold more than 50 per cent of Pt TMS, and the funds from the investment will be used as working capital to expand operations and accelerate value for shareholders.
Company management expects the collaboration with Pt Arsari Tambang to be transformative and one that will bring enormous benefit to shareholders.
The goal of this partnership is to enable the company to obtain the necessary resources and expertise to commence production, further assist in obtaining financing to start its gold production and support the exploration drilling necessary to identify all available resources on Sangihe Island.
Leadership
The company is honoured to announce that Hashim Djojohadikusumo will join the board of Pt TMS as president commissioner. Mr. Djojohadikusumo is the founder and chairman of Arsari Group.
Mr. Djojohadikusumo is an entrepreneur with a long record of success in international and Indonesian markets. He has distinguished himself as a philanthropist, in environmental conservation, and in Indonesian cultural heritage preservation. His ecologically focused initiatives include the backing of programs to save the orangutan and honey bears of Kalimantan (Borneo) and improving the welfare of the wild elephant population of Sumatra. He also has deep familial ties in North Sulawesi, where Sangihe Island is located.
Terry Filbert, chief executive officer of Baru Gold, commented: "I'm incredibly excited about our new partnership with Pt Arsari Tambang and honoured to have Hashim as president commissioner on the board of Pt TMS. All shareholders will benefit from the support of Pt Arsari Tambang and Hashim's expansive knowledge and experience. It's a wonderful collaboration. I would personally like to thank the staff and legal teams of both Baru Gold and those of Pt Arsari Tambang for their hard work bringing this transaction to a close."
The company reminds shareholders that this letter of intent is subject to a shareholder vote and regulatory review by both the TSX-V and the Indonesian Ministry of Energy and Mineral Resources. The transaction is subject to parties entering into agreed documentation.
About Sangihe gold project
The Sangihe gold project is located on the Indonesian island of Sangihe, off the northern coast of Sulawesi. Sangihe has two existing National Instrument 43-101 reports with over one million ounces of gold resource identified (inferred mineral resource of 1,022,987 and 114,700 indicated ounces of gold), as reported in the company's "Independent Technical Report: Sangihe Property" (Caracle Creek International Consulting Inc., Sept. 22, 2010) and "Independent Technical Report on the Mineral Resource Estimates of the Binebase and Bawone Deposits, Sangihe Project, North Sulawesi, Indonesia" (Mining Associates Pty. Ltd., May 30, 2017).
Readers are cautioned that mineral resources that are not mineral reserves do not have demonstrated economic viability. The company intends to proceed to production without the benefit of first establishing mineral reserves supported by a feasibility study. The company cautions readers that the any production decision made by the company will not be based on a National Instrument 43-101 feasibility study of mineral reserves that demonstrates economic and technical viability, and as such, there may be involved increased uncertainty and various technological and economic risks.
The company's 70-per-cent interest in the Sangihe-mineral-tenement contract of work is held through Pt Tambang Mas Sangihe. The remaining 30-per-cent interest in TMS is held by other Indonesian corporations. The term of the Sangihe CoW agreement is 30 years upon commencement of the production phase of the project.
Baru Gold has met all the requirements of the Indonesian government and has been granted its environmental permit.
About Baru Gold Corp.
Baru Gold is a dynamic junior gold developer with NI 43-101 gold resources in Indonesia, one of the top-10 gold producing countries in the world. Based in Indonesia and North America, Baru Gold's team boasts extensive experience in starting and operating small-scale gold assets.
Frank Rocca, BAppSc (geology), MAusIMM, MAIG, CPI-KCMI, chief geologist of Baru Gold, is the qualified person as defined under NI 43-101, who has reviewed and approves the content of this release.