Discussions with Norton Goldfields – do we have the full story?

By the end of this month management will have to decide whether the Company wants to move to 100% ownership of the project. With A$ 4,714k cash at June 30, 2017 and an expected outflow of A$738k for the September quarter, available cash would drop to less than A$2million.

What concerns me more is that there is no agreement with regards to the title transfer. Whilst the delays caused by the time government approvals have given the opportunity to progress design work, it would be a pity should project finance be delayed by the lack of title transfer.

The issue is being referred to as either “discussion re timing of title transfer” (investor presentations dated 30/08/17 and 21/07/17) or “potentially renegotiate the existing agreement” (Announcement dated 08/12/16 re BFS).  The latter states that “a deferred purchase consideration of A$13 million payable to Norton out of project profits. It has been assumed that these deferred payment will not commence until project debt has been repaid".

Is there the source of potential disagreement and delay? The CRB release dated 03/04/14 announcing the acquisition of the Mt Morgan project stated  

• payment to Norton of $100k on completion of due diligence and $400K after six months.
• Completion of a BFS on the Project;
• Payment to Norton of $2M on completion of a capital raising following the BFS; and
• A final payment to Norton of a total $13M via 20% of the annual net earnings from operations of the Project.

Norton may not be happy with CRB’s interpretation of net earnings (after repayment of debt).
The question the CRB management has to answer whether the cost of higher interest payments (by interpreting net earnings as excluding repayment of debt) will be less than if the entire project is further delayed by the lack of agreement of title transfer.

Norton was taken over by Zijin Mining in June 2015 and deregistered. It is however interesting that the their ASX announcement prior to delisting and the Zijin Mining website still give the impression that they hold a strong ownership interest …….. makes discussions a little bit harder.

http://www.zijinmining.com/business/product-detail-26913.htm
Norton Gold Fields Limited is one of Australia's largest domestic gold producers, listed in Australian Stock Exchange (ASX: NGF). It is located in 40 km northwest of the town of Kalgoorlie in Western Australia. In 2012, Zijin Mining Group took over 89.15% of shares of Norton. In June 2015, Zijin acquired the remaining shares and owned 100% interests of Norton.
Its core assets comprise of Paddington gold mine in Kalgoorlie of Western Australia and Mount Morgan tailings projects in Rockhampton of East Queensland. Paddington gold mine includes a 3.7 Mtpa Paddington Mill and a highly prospective tenement package of 1.01 km².

http://www.nortongoldfields.com.au/Projects_Mount_Morgan.htm
Norton has considered many options for the Mount Morgan project and we were pleased to team up with Raging Bull Mining (Raging Bull) and their partner Carbine Resources Limited (ASX: CRB) to take the project into feasibility stage (see CRB ASX announcement dated 4 April 2014). ………………. Norton will continue to work with Raging Bull, Carbine Resources, the Department of Natural Resources and Minerals (Qld) and the local community to ensure we meet our objectives and obligations during the development process.  In addition to the Mt Morgan tenements and Kundana plant acquisition, Raging Bull will also acquire Norton’s Many Peaks copper and gold exploration tenements.

http://www.asx.com.au/asxpdf/20150123/pdf/42w4rn15zdzhvx.pdf
Norton continues to work closely with the Queensland Department of Natural Resources and Mines (DNRM) and Carbine Resources Limited in line with the agreement on Carbine’s testwork and study of the project.
The DNRM has approved the amended Plan of Operations and a Heritage Exemption has been obtained for a drilling program which is expected to commence Q1 2015 following satisfaction of safety management requirements. The DNRM has agreed to extend the Plan of Works timeline to incorporate this drilling program and its subsequent testwork.

http://www.asx.com.au/asxpdf/20150417/pdf/42xyt6vy4n0j89.pdf
Norton continues to work with Raging Bull, Carbine Resources, the Department of Natural Resources and Minerals (Qld) and the local community to ensure we meet our objectives and obligations during the redevelopment process.