Mt Morgan Sale Progresses but Tranche 2 Completion and Milestones Remain Uncertain

Strategic Asset Sale Progresses

GBM Resources Limited (ASX – GBZ) has announced the completion of the first tranche payment in its staged sale of a 51% interest in the Mt Morgan Gold-Copper Project to Lithium Energy Limited (ASX – LEL). The initial payment of $400,000 marks a significant milestone in a transaction that could ultimately deliver up to $3.2 million to GBM, including deferred and milestone-based payments.

The sale agreement, executed earlier this year, involves a two-tranche transfer of tenements and mining information. With the first tranche now complete, Lithium Energy has taken ownership of a majority interest in the tenements, while GBM has secured immediate cash proceeds and retained upside through contingent milestone payments and a 1.33% net smelter return (NSR) royalty.

Financial Structure and Future Payments

Beyond the initial $400,000, GBM is set to receive approximately $1.6 million in further staged cash payments over the next 21 months, split between a deferred tranche 1 payment and the tranche 2 completion payment. Additionally, contingent milestone payments of up to $1.2 million are linked to key project development achievements such as the completion of a maiden JORC Mineral Resource Estimate, a scoping study, and a definitive feasibility study.

These structured payments provide GBM with a balanced mix of near-term cash flow and longer-term exposure to the project’s development potential. The inclusion of a royalty interest, with a partial buyback option available to Lithium Energy, further aligns incentives and preserves GBM’s participation in future production upside.

Strategic Focus on Core Assets

GBM’s Executive Director Andrew Krelle highlighted the transaction as a key step in the company’s strategy to divest non-core assets and concentrate on its flagship Drummond Basin gold portfolio. This portfolio boasts a substantial JORC resource base of approximately 1.8 million ounces, with ongoing drilling programs aimed at expanding this resource and advancing GBM’s position as a mid-tier Australian gold producer.

The sale of the Mt Morgan Project, located in Queensland’s Mt Isa Inlier, allows GBM to strengthen its balance sheet while maintaining exposure to Mt Morgan’s upside through royalties and milestone payments. Lithium Energy, meanwhile, commits to a minimum $4 million expenditure on the project before tranche 2 completion, underscoring its intent to advance exploration and development.

Conditional Completion and Joint Venture Option

The tranche 2 completion, scheduled for 21 months after tranche 1, is contingent on several conditions including tenement renewals and grant approvals. Should tranche 2 not complete within 24 months, the parties have agreed to form a joint venture with defined ownership interests and management arrangements, ensuring continued development of the Mt Morgan assets.

This layered approach provides flexibility and risk mitigation for both GBM and Lithium Energy, balancing immediate cash returns with longer-term project advancement and collaboration.