Kaizen DiscoveryInc. said April 1 that it has entered into a strategic financing agreementwith ITOCHU Corp. to advanceexploration at its Pinayagold-copper project in Peru.
Under the deal, Kaizen will receive up to C$2.5 million fromITOCHU in initial exploration funding in exchange for an indirect 20% stake in theproject, in three stages.
ITOCHU will make a payment of C$625,000 upon the closing of thetransaction, expected in early April, for an initial 5% interest in Kaizen unitKaizen Peru Holdings Ltd., the indirect holder of the Pinaya project.
The second payment of C$625,000 will be made for another 5% stakein the Kaizen unit and is subject to obtaining approvals from the local communityfor lease and surface rights, as well as required regulatory approvals.
With the third payment of C$1.25 million, ITOCHU will bring itsaggregate interest in the Kaizen unit to 20%, subject to necessary environmentalpermits, water and electricity rights required to conduct exploration drilling atproject site, within two years of the initial payment.
Additionally, Kaizen has agreed to match ITOCHU's explorationfunding, bringing total funding to C$5 million for the company's planned first phaseof exploration at Pinaya, which will cover about two years.
After the payment of the second tranche to Kaizen and acquiringa 10 % stake in the project, ITOCHU will obtain rights with respect to approvalsof annual exploration and development plans for the Pinaya project. ITOCHU alsoreserves the right to withdraw from the project, or return Kaizen's shares for apayment that may include a pro rata portion of any unspent funds, after two years.
Following Kaizen's C$2.5 million funding, both parties will besubject to customary cash call obligations and dilution, if any party does not fundits then pro rata outstanding amount for funding.
Kaizen inkeda nonbinding memorandum of understanding with ITOCHU to sell its minority stakein the project for sizable exploration financing in December 2015.