Hot Chili Limited has locked in an additional US$15 million in non-dilutive funding from OR Royalties via an expanded net smelter return royalty agreement, adding the pre-resource La Verde project to the Costa Fuego copper-gold portfolio. This deal doubles OR’s commitment to US$30 million and underpins ongoing exploration and development.
- US$15 million added to OR Royalties agreement
- La Verde included in royalty footprint despite no resource yet
- Total royalty consideration now US$30 million
- Funding supports La Verde and Costa Fuego advancement
- Updated buyback terms and right of first offer included
Significant Royalty Expansion Highlights Confidence in La Verde
Hot Chili Limited (ASX:HCH) has secured a fresh US$15 million injection from OR Royalties Inc., doubling the total royalty consideration for its Costa Fuego copper-gold project to US$30 million. Crucially, this amended deal extends OR’s net smelter return (NSR) royalty to include the La Verde project, a pre-resource asset that has yet to define a mineral resource estimate. This move signals a strong vote of confidence from one of North America’s most technically rigorous royalty companies in La Verde’s exploration potential.
La Verde’s inclusion in the royalty footprint is notable given it currently carries no defined mineral resource, contrasting with the original 2023 agreement that was based on a 725 million tonne indicated resource underpinning a Preliminary Economic Assessment (PEA). Since then, Hot Chili has updated its Costa Fuego resource to 798 million tonnes indicated, forming the basis of a 2025 Preliminary Feasibility Study (PFS) which supersedes the earlier PEA.
Funding Structure and Strategic Terms
The US$15 million royalty consideration payable at closing, expected in July 2026 subject to customary conditions, is non-dilutive, complementing the A$40 million equity raise Hot Chili completed in February 2026. The proceeds are earmarked for advancing La Verde and the broader Costa Fuego project, which remains a key focus with three drill rigs currently operational at La Verde.
The amended agreement maintains the original royalty rates, 1.0% NSR on copper and 3.0% NSR on gold production from Costa Fuego, equivalent to a 1.12% copper equivalent (CuEq) NSR across payable metals. It also updates buyback provisions, allowing Hot Chili to reduce the royalty to 0.5% NSR on copper and 2.5% NSR on gold before the fourth anniversary of the original royalty closing, with specified premiums payable to OR.
Additionally, OR retains a right of first offer on any future royalty, streaming, or similar interests Hot Chili might sell, securing its position in the project’s financial structure. The royalty is secured against all project assets, with provisions to subordinate to senior bank loan facilities if required.
Market Implications and Next Steps
Hot Chili’s Managing Director Christian Easterday emphasised the significance of OR’s renewed commitment, stating that backing a pre-resource asset like La Verde underscores the district-scale potential he sees for Costa Fuego’s copper-gold production hub. The transaction not only injects capital without diluting shareholders but also provides a credible external valuation benchmark for La Verde ahead of its maiden mineral resource estimate.
The company is poised for a busy period with ongoing drilling efforts at La Verde expected to fuel strong news flow. A maiden resource estimate and a revised pre-feasibility study for Costa Fuego are anticipated, which will be critical milestones for investors assessing the project’s evolving economics and scale.
Given Hot Chili’s current market capitalisation of approximately US$280 million, the US$30 million royalty consideration from OR equates to a meaningful validation of value at this stage of project development.
Bottom Line?
The expanded royalty deal bolsters Hot Chili’s funding without dilution and signals strong external confidence in La Verde’s potential, setting the stage for upcoming resource milestones.
Questions in the middle?
- How will upcoming drilling results at La Verde influence the maiden resource estimate?
- What impact will the revised Costa Fuego pre-feasibility study have on project economics?
- Could OR Royalties increase its stake or influence further as the project advances?