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Canadian developer-explorer Donner Metals has forfeited its interest in the Bracemac-McLeod zinc-copper mine and mine property area, which is located in the Matagami region of Quebec, and operated by a subsidiary of Glencore Xstrata.
The company was forced to do so as a result of an “uncured default”, under a metal purchase agreement from July 2011, entered into by Donner, Sandstorm Metals & Energy, Sandstorm Metals & Energy (Canada) and Sandstorm Gold.
Sandstorm Metals & Energy is the parent of Sandstorm Metals & Energy, which is known as Sandstorm Metals.
It was disclosed on August 13 this year that Donner had failed to pay amounts owed under a development and operating agreement with Glencore, dated July 2011, with respect to Donner’s share of the monthly expenditure at Bracemac-McLeod.
On August 30 this year, Sandstorm Metals sent a letter informing Donner that, as of August 15, Donner was in default of the metal purchase agreement.
Sandstorm Metals also sent notice of Donner’s default under the metal purchase agreement to Glencore Xstrata.
Donner does not have the funds available to pay the cash call, which was due to be paid on August 12, it said.
Glencore Xstrata has issued a 3% net smelter returns royalty (NSR) to Sandstorm Metals on 100% of production from Bracemac-McLeod, for the interest in Bracemac-McLeod acquired by Sandstorm Metals from Donner.
Glencore Xstrata will also gain an option to acquire 40,360,330 Donner shares and 26,500,000 warrants. The option is exercisable for $2 million and the warrants for $0.10 per share.
Assuming Glencore Xstrata exercises its option and the warrants in full, it would own about 19.5% of Donner’s outstanding shares on a partially diluted basis.
Sandstorm Metals and Sandstorm Gold have given up their respective copper and gold streams, and Sandstorm Metals will issue 1.33 million shares to Donner.
Donner has provided both Glencore Xstrata and Sandstorm Metals with an irrevocable and unconditional release and discharge of any claim against either company.
It has also agreed to an “orderly execution” of the agreement.
Donner will receive a 1% NSR from Sandstorm Metals and Sandstorm Gold from any proceeds from the 3% NSR that exceed C$49 million.
Under an intercreditor agreement, Donner and Sandstorm Metals have given Glencore Xstrata an irrevocable right and option to acquire Donner’s interest in Bracemac-McLeod, and all related rights or title, every time Glencore Xstrata receives a copy of a default notice.
On August 30, Donner and Sandstorm Metals entered a settlement agreement, immediately after which Sandstorm Metals sold Donner’s interest in Bracemac-McLeod to Glencore Xstrata, as well as all related rights or title.
The board of directors of Donner agreed to co-operate with the orderly execution and delivery of an assignment and assumption agreement as it was the only solution that provided some value to Donner and a “viable possibility to develop a restructuring plan”.
Donner still holds interests in five remaining Matagami joint ventures, where exploration will carry on.
Claire Hack chack@metalbulletin.com Twitter: @clairehack_mb