Otterburn is to acquire all of the outstanding shares in private British Virgin Islands corporation K92 Holdings International, which already has a share sale agreement to acquire all of the outstanding shares of Barrick (Kainantu) Limited.
In a statement to the Toronto Stock Exchange, Otterburn confirmed it would acquire all the outstanding shares of K92 Holdings in exchange for common shares of Otterburn on the basis of one payment share for each share of K92, at a price of C50c (A49c) per payment share.
Meanwhile, subsidiary K92 Holdings (PNG) had already agreed to acquire all of the outstanding shares of Barrick (Kainantu), which included the Kainantu copper-gold mine, exploration licences and a full mining processing plant, camp, infrastructure, tailings facility and partial mobile fleet.
In conjunction with the transaction, Otterburn negotiated a private placement totalling $10 million with funds to be raised by issuing up to 20 million shares at a price of 50c per share.
The funds will be used to refurbish the mine and mill, prepare for the recommencement of mining and milling at a rate of 180,000 tonnes per annum and undertake exploration required to keep the exploration tenement package in good standing.
Otterburn also proposes to change its name to K2 Gold Corp on closing the deal.
Company president and CEO Brian Lueck, who will be appointed chief operating officer following the transaction, confirmed the company would own 100% of Kainantu mine in PNG, which is currently owned by a subsidiary of Barrick Gold.
Barrick closed down the Kainantu mine in early 2009 as it was unprofitable, not even two years after purchasing it from Highlands Pacific for $141.5 million in December 2007.
"The project is being purchased from Barrick by K92PNG for a purchase price of $US62 million ($A66 million) comprising a $2 million deposit and a maximum of $60 million in potential earn-out payments," Lueck said.
"These earn-out payments are subject to a term of 10 years and depend on future exploration success for indicated resources and/or ounces mined, contingent on a million ounce gold equivalent threshold to activate payment, which includes the current 0.36 million ounce gold equivalent measured and indicated resource.
"If K92PNG exceeds the threshold of 1 million ounces gold equivalent within 10 years, Barrick will receive $20 million.
"Additional amounts will be paid at the same rate of $20 per gold ounce up to a maximum of $60 million or 3 million ounces.
"Handover of the minesite to K92PNG is contingent on the renewal of the mining leases, which are currently under application, while the underlying exploration licences are current."