By The Gold Report

Source: Streetwise Reports   06/13/2018

Scarsdale Equities analyst Mike Niehuser reviewed various aspects of the facility.

In a June 6 research note, analyst Mike Niehuser with Scarsdale Equities reported Lion One Metals Limited (LIO:TSX.V; LOMLF:OTCQX) entered into a term sheet for financing to build a mine and a processing facility at the Tuvatu gold project in Fiji. “This follows over six months of negotiations and due diligence as the project has been optimized,” he added.

Sinosteel Equipment & Engineering Co., the engineering, procurement and construction contractor, and Baiyin International Investment will provide a $40 million ($40M) EPC (engineering, procurement and construction) and gold doré offtake facility. “The terms appear to be competitive and do not include hedging or prepayment fees,” Niehuser wrote.

The agreement includes the option for Vancouver-based Lion One to increase the facility by $10M at the same terms “plus a $10M unsecured facility,” noted Niehuser. The financing term is five years. The interest rate is 7.5% “with capitalized interest for the first two years, after which the balance will be repaid in quarterly payments over the remaining three years.”

Finally, the financing includes a net smelter return royalty of 2.5% on the first 350,000 ounces of gold. For comparison’s sake, the PEA projects that about that much, 352,931 ounces, should be produced in the first seven years’ time. Niehuser explained that “the PEA assumed modest capital costs and efficient mining of high-grade gold resources, resulting in significant cash flow, which may rapidly repay capital and fund mine development and additional exploration of prospective gold targets.”

Closing of the financing is expected in Q3/18, after which Lion One will likely release an updated capital cost budget for Tuvatu. However, Niehuser wrote, “It appears that the facility should be adequate to cover the construction and capital costs with cash on hand.” In the interim, the company will continue exploring.

Niehuser reiterated the key points about Tuvatu. On the island of Viti Levu, the gold project is “on trend with the caldera-situated Vatukoula gold mine, which has produced 7 million ounces of gold in the last 82 years,” he indicated.

As far as the mineral resource at Tuvatu, in the Indicated category are 1.1 million tons (1.5 Mt) of gold at a grade of 8.46 grams per ton (8.46 g/ton), for 299,500 ounces. In the Inferred category are 1.5 Mt of gold at a grade of 9.7 g/ton, for 468,000 ounces. These calculations are derived using a cutoff grade of 3 g/ton gold.

Scarsdale Equities has a Buy rating and a CA$1.40 per share price target on Lion One, whose stock is currently today at around CA$0.60 per share.

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Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures from Scarsdale Equities, Lion One Metals Ltd., June 6, 2018

Author Certification: R. Michael Niehuser, the author primarily responsible for this report certifies, with respect to each security or issuer in this report, that: (1) all of the views expressed in this report accurately reflect his own personal views about the subject companies and their securities; (2) part of the author’s compensation may be, directly or indirectly, related to a portion of the commissions generated by Scarsdale Equities LLC [“SE”] in transactions in this or other securities designated for the author’s credit; (3) the author does not receive compensation based on investment banking or advisory services SE might provide to this or any other issuer.

Scarsdale Equities LLC, at the time of publication, does not make a market in any security.
The author does not have a financial interest Lion One Metals Limited (LIO.V) covered in this report.
Part of the author’s compensation may consist of a portion of the commissions generated by transactions in this issuer’s securities placed at Scarsdale Equities LLC for the credit of the author.
Scarsdale Equities LLC expects to receive advisory or investment banking compensation from the issuer in the next ninety days.

( Companies Mentioned: LIO:TSX.V; LOMLF:OTCQX,
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