Galileo Resources plc is set to cede ownership of Star Zinc Project to Siege Mining Limited at a cost of for US $750,000, with US $200,000 covering the large-scale exploration licence 19653-HQ-LEL and US $550,000 for Galileo ceding its participation in the Star Zinc Project and all exploration information which it has in relation to the project. Galileo will also be paid a royalty based on future sales of zinc from the project for Galileo allowing Siege to use Galileo’s information, know-how and commercial experience in relation to the project.
The Company has entered into the agreement following a period in which it has with stakeholders reviewed the options for putting the project into operation taking into consideration operational, community and regulatory issues associated with mining a project that is in the outskirts of Lusaka, and allowing ownership and operational responsibilities to be assumed by a Zambian mining company, whilst the Company can still participate in the future success of the Star Zinc Project.
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The agreement
Siege is a Zambian owned mining company and it and its principals including Joakim Chewe Chelelwa have applied for / are in the process of being granted the requisite licences within the Star Zinc Project area to allow them to conduct mining activities. Under the Agreement the Star Zinc project will be operated by Siege, as a Zambian community focused project, appropriate to a project located near an expanding urban area near Lusaka.
Payment process
US $50,000 will be paid on Completion and US $700,000 paid at the later in 90 days from the signing of the Agreement and Completion. Completion will occur once the Star Zinc Project Licence has been assigned to Siege.
Royalty Payable to Galileo
Galileo will be paid a royalty on any future sales of zinc from the Star Zinc Project based on the zinc grade. The minimum royalty rate is 3% and increasing by 1% for each US $250 increase in the zinc price above US $2,500 per tonne up to a maximum of 10%. The current LME price for zinc is US $2,786 per tonne based on the London Metals Exchange closing cash price on 3 March 2021 being the last practical date before this announcement. If the Zinc concentrate grade is 25% for a sale at a zinc price of US $2,500 per tonne this would result in a royalty of US $18.75 / dmt whereas if the Zinc concentrate grade were 30% a sale at a zinc price of US $2,500 per tonne would result in a royalty of US $22.50 / dmt.
