Non-dilutive financing
Long-term royalty investors are betting on the success of American West Metals’ (ASX: AW1; FRA: R84) Storm copper-zinc project on Somerset Island in Nunavut. American West announced today that the Australian-based Taurus Mining Royalty Fund L.P. has committed to a royalty package for the Storm Copper Project that will provide up to US$12.5 million (A$18.8 million) in staged funding. The royalty financing has a non-dilutive effect on the company’s capital structure compared to conventional equity financing and provides American West with a solid balance sheet for the future.
Taurus had already acquired a historical royalty of 0.875% from the previous owner of the Storm project earlier this year. Through the deal with American West, Taurus gains an additional 0.95% royalty, bringing the total royalty on the Storm project to 1.825%. Funding under the royalty package will be allocated to American West Metals and Aston Bay Holdings in proportion to their respective interests in the Storm joint venture, i.e. 80% to American West Metals and 20% to Aston Bay Holdings.
The committed funds are to be released in stages: US$5 million (A$7.5 million) is due upon signing of formal documentation. A further US$3.5 million (A$5.25 million) will be released following the submission of a PFS for Storm and the submission of development consent documentation to Storm. The remaining US$4 million (A$6 million) is to be paid to American West upon announcement of an increase in the JORC compliant resource for Storm to at least 400,000 tonnes of contained copper with a resource grade of at least 1.00% Cu. American West submitted an initial independent JORC Code 2012 Indicated and Inferred Mineral Resource Estimate (MRE) for the Storm project in January 2024. The current MRE consists of 17.5 million tonnes at 1.2% Cu and 3.4 g/t Ag, which includes 205,000 tonnes of copper and 1.9 million ounces of silver. High-grade copper discoveries made in 2023 at Thunder (48.6m @ 3% Cu in ST23-03), Lightning Ridge (15.2m @ 2.3% Cu and 15.2m @ 2.1% Cu in ST23-52) and Cyclone North (7.6m @ 1% Cu in ST23-55) are not yet included in the MRE. These targets represent an immediate opportunity to further expand the resources at Storm and are therefore the focus of ongoing drilling.
Dave O’Neill, Managing Director of American West Metals, commented: “We are very pleased to have secured royalty funding to support the advancement of the Storm copper project. The royalty financing provides American West with a substantial amount of funds on terms that are significantly more attractive and less dilutive than alternative equity financings. The investment by Taurus is a strong endorsement of Storm’s potential and a recognition of the strong growth fundamentals established by American West’s exploration and resource delineation work to date. The Company is now well positioned to accelerate the 2024 and 2025 work programmes at Storm, with the 2024 summer drilling programme already well underway. This puts American West in a strong position to grow shareholder wealth as the demand outlook for copper reaches an all-time high.”
Michael Davies, Taurus Chief Investment Officer, added: “We are excited to expand our interest in the Storm Copper Project, which is rapidly becoming a district-scale, high-grade copper project. We look forward to working with the American West Metals team to further develop Storm’s copper deposit and advance the project to production in the coming years.”
American West Metals will use the proceeds from the royalty financing to accelerate the resource expansion of Storm 2024. The summer drilling programme is already underway, comprising 20,000 m of drilling – around twice as much as in the previous year. In addition, American West intends to bring forward the logistics for the 2025 field activities, which will enable significant savings in the costs of the 2025 programme. The company also intends to accelerate its ESG, mining and development studies.
Conclusion: After last year's success, American West intends to finally demonstrate the global significance of the Storm project with this year's drilling. The company has only explored 5% of the prospective 100 km long copper belt within the project area through geophysical surveys and drilling. The dual strategy is aimed at rapidly expanding the near-surface copper resources at Storm and making further new discoveries at regional prospects such as Tornado, Blizzard and Tempest (see Figure 1). The near surface mineralisation at Storm is high grade and amenable to simple processing techniques. Test work using ore sorters and in-line pressure equipment has produced spectacular results on typical Storm mineralisation, producing high-grade copper concentrates. This technology and process route could eliminate the need for a conventional flotation plant and associated tailings facility, reducing space requirements and significantly reducing capital. Scoping studies are currently underway to further optimise and refine the process. In this context, Dave O'Neil has publicly spoken of a "penny drop moment" for investors, which he expects. The royalty financing that has now been agreed speaks in favour of the confidence of long-term oriented investors and relieves American West of further dilutive capital rounds for the foreseeable future. In the short term, however, the royalty deal has only triggered a weak response on the market. American West's share price fell by around 7 per cent to close at AUD 0.135 amid weak trading.
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