Torq announces earn-in option, JV agreement with Gold Fields

Torq Resources announced that as of July 31, 2024 it has entered into a non-binding term sheet with an affiliate of Gold Fields Limited with respect to a proposed option and joint venture agreement to advance the exploration and development of Torq’s Santa Cecilia copper-gold project in Chile. Under the Option Agreement, Gold Fields is to be granted a two-stage option to acquire up to a 75% interest in the Santa Cecilia Project in exchange for incurring an aggregate of US$48 million in spending at the project over a maximum of 6 years. he Santa Cecilia mineral exploration project is a 3,250-hectare property located approximately 100km east of the city of Copiapo, Chile, in the southern region of the world-class Maricunga belt and immediately north of the El Indio belt. Under the Term Sheet, the parties intend to negotiate and execute a definitive Option Agreement within a timeframe to allow for consideration by Torq’s shareholders for approval at Torq’s 2024 annual general meeting anticipated to be held in mid-November 2024. Neither party will be bound to proceed with the transactions contemplated by the Term Sheet unless and until such time as the definitive Option Agreement is executed. Execution of the Option Agreement remains subject to completion by Gold Fields of its legal and technical due diligence which is presently in its advanced stage. The Term Sheet contemplates that Torq will grant to Gold Fields an initial option to acquire up to a 51% interest in the Santa Cecilia Project as follows: Gold Fields must fund an aggregate of US$18 million of exploration expenditures, property payments and any other direct or allocated expenses related to the project within the first 30 months from formal closing under the Option Agreement; Gold Fields must invest at least US$6 million in connection with the Stage 1 OptionL Gold Fields will receive a 10% interest in the Santa Cecilia Project upon completing the Minimum Commitment; and upon the completion of the Minimum Commitment, Gold Fields will have the option to earn an additional 41% interest in the Santa Cecilia Project upon completion the balance of US$12 million of exploration expenditures within the balance of the 30-month Stage 1 Option period. If Gold Fields acquires the Initial Interest but notifies Torq that it does not wish to complete the Stage 1 Option, Torq will have the right to purchase the Initial Interest back from Gold Fields for US$6 million at any time within 48 months of the date of notification. If Gold Fields satisfies the Stage 1 Option, it will have a further option to acquire an additional 24% interest in the Santa Cecilia Project by funding an additional aggregate of US$30 million and the option period will be extended by 42 months. If Gold Fields does not complete the Stage 2 Option by the expiry of the option period or elects not to complete these expenditures, the Stage 2 Option will terminate and Gold Fields will retain its 51% interest. Gold Fields may choose to make a cash payment to Torq in lieu of any of its Stage 1 or 2 project spending commitments. Torq and Gold Fields will establish a joint venture for the exploration and development of the Santa Cecilia Project (the “Joint Venture”) upon the earlier of: completion by Gold Fields of the Minimum Commitment to earn a 10% interest, followed by an election by Gold Fields not to complete the Stage 1 Option; having completed the Minimum Commitment and elected to proceed with the completion of the exercise of the Stage 1 Option, Gold Fields fails to complete the exercise of the Stage 1 Option; after completing the Stage 1 Option, Gold Fields determining not to proceed with the Stage 2 Option; having completed the exercise of the Stage 1 Option and elected to proceed with the exercise of the Stage 2 Option, Gold Fields fails to complete the exercise of the Stage 2 Option; and the completion by Gold Fields of the exercise of the Stage 2 Option. The Joint Venture will be governed by a joint venture agreement to be incorporated within the definitive Option Agreement that will provide for the joint management of the Santa Cecilia Project. It is anticipated the JVSA will be governed by Chilean law and provide for customary provisions regarding management of the Santa Cecilia Project through a management committee with voting rights proportional to each party’s interests, approval of annual programs and budgets, rights to participate on board-approved programs and budgets, dilution for non-participation, super-majority approval of extraordinary matters, restrictions on transfer and agreements relating to the project operator. Torq will remain as project operator until such time as Gold Fields earns a 51% interest through exercise of the Stage 1 Option. To the extent that a party’s interest is diluted to less than 10%, its ownership interest in the Joint Venture will be converted into a 2% net smelter royalty capped at US$20 million.