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Gem Resources PLC has taken a significant step in its strategic reorientation by agreeing to sell its interests in South Africa’s Gravelotte emerald mine. This move aligns with the company’s transition towards gold processing and the reduction of its funding commitments.
The agreement involves the sale of Gem Venus Holdings, the entity that holds Gem Resources’ Gravelotte interests, to Global Gem Mines. The deal is valued at a fixed price of US$1.7 million, with additional potential earnings in the form of royalties.
The payment is structured as follows:
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- US$1.3 million is due upon completion, which includes an initial deposit of US$400,000 to be placed in escrow upon signing.
- Two subsequent installments of US$200,000 each will follow before the first and second anniversaries of the completion date.
It is important to note that the escrow deposit has yet to be received by Gem Resources.
A potential royalty of 5% on gross revenue from rough emerald sales could increase the total consideration to US$2.4 million. This royalty agreement is valid for two years post-completion but may be extended under certain conditions, such as qualifying operational suspensions. The royalty is capped at US$700,000. However, any royalty-equivalent amounts accrued during interim operations will reduce the cap and benefit the mine subsidiary instead, possibly resulting in reduced or no royalty income for Gem Resources.
Once the statutory appointments are in place, the purchaser’s group will assume responsibility for funding the care, maintenance, and operations of the Gravelotte mine. This disposal is part of Gem Resources’ broader strategy to focus on operating, revenue-generating businesses. In line with this strategy, the company is also pursuing the conditional acquisition of the El Yarumo gold processing operation in Colombia.
Completion of the sale is contingent upon obtaining South African ministerial consent, further due diligence by the buyer, and other conditions. The parties plan to submit the consent application within 30 business days of signing the agreement. If approval is not granted within 12 months of submission, the sale agreement will lapse unless both parties agree to an extension.
This transaction marks a pivotal moment for Gem Resources as it seeks to streamline its operations and hone its focus on more lucrative and sustainable ventures.
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The African Mining Market is a source of insightful information on mining & industrial markets, and developments in Africa.
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