US$5 Million Farm-Out Agreement for Gubong Gold Project in South Korea

A Transformative Free Carry Structure to Advance c.1.3m oz High Grade Gold Mine to Production

Bluebird Merchant Ventures Ltd, a gold company primarily focused on bringing historic mines back into production, is delighted to announce that it has signed a US$5 million Farm-out Agreement for its high grade Gubong Gold Project (‘Gubong’ or ‘the Project’) in South Korea (‘the Agreement’ or ‘Farm-out’).


  • Staged US$5 million investment by a consortium of South Korean businessman (‘the consortium’) to gain up to 60% of Joint Venture company (‘JV’) established to develop Gubong to production.
  • Agreement provides Bluebird with a free carry to production at Gubong, previously South Korea’s second largest gold mine.
  • Agreement highlights the belief by both parties that Gubong’s c.1.3Moz Au can be advanced to production.
  • The consortium will provide JV management and finance and as well as corporate and planning expertise at local, district and governmental levels.
  • Bluebird technical services chargeable to the JV at market rates
  • JV model successfully implemented in the Philippines where the Batangas Gold Project (‘Batangas’) is being advanced towards production with an EIS Study in progress (US$2 million investment).
  • Evaluating a similar JV agreement to develop the Kochang Gold and Silver Mine in South Korea.

Bluebird CEO Colin Patterson said, “This US$5 million investment is fantastic news for Bluebird on multiple levels as we look to develop the high grade Gubong gold mine. We have been working informally with our South Korean partners over the last year to find the optimal development path for Gubong and this agreement means we have a free carry on the Project to production. We believe that our partner’s willingness to enter into a formal agreement and invest significant capital, currently more than our market cap, emphasises that the right path has been identified and that together we can bring Gubong into production. Importantly, being South Korean nationals, its team better understand the local, district and national geo-political environment and can ensure all stakeholders are supportive while we will continue to provide the technical knowledge to drive value.

“In the Philippines, we’ve found the JV model to be the best fit, reducing risk and lessening our dependence on capital markets for value delivery. Our recent investment secures a free carry on the Gubong and Batangas high-grade gold projects, representing a capital commitment of around US$7 million. With promising long-term gold fundamentals, we look forward to providing regular updates on our progress and creating value for all involved.”


Gubong is the larger of two 100% owned gold mining projects in South Korea. It was historically the second largest gold mine in South Korea and the Korea Resources Corporation estimated 2.34Mt at some 6 g/t Au garnered from 57 drill holes over 17,715.3m. It is an orogenic deposit, which typically have a depth of 2km compared to the current depth of 500m. The Company believes it has a potential resource of +1Moz Au in-situ, plus an estimated additional 300,000 oz Au from satellite ore bodies. Having completed extensive analysis of the historic data, it aims to bring the Project into production with a medium-term target of 60,000 oz Au per annum rising to 100,000 oz Au.

Under the terms of the Agreement, the South Korean’s will form an SPV for the investment that will facilitate Gubong’s development, investing up to US$5 million in return for a maximum 60% of the Project. The South Korean JV partner is a consortium of successful South Korean business professionals with a broad range of expertise, including metal trading. The Company has been working informally with the consortium to assess the most favourable path to advance Gubong, with the resultant JV structure considered the most optimal option to achieve success.

The Farm-out is over three stages with milestones needed to be achieved for the grant of equity in the JV. In the first and second stages, the JV will aim to obtain the relevant permits relating to bringing Gubong back into production (such as the Mountain Temporary Use Permit – MTUP) and once received prepare a Development Report, which details the planned development of taking Gubong into production. In the third stage, the JV will execute this report and carry out other exploration and production related activities including but not limited to sampling, drilling, trenching, dewatering, permitting, mapping, surveys, technical studies (including the Development Report, environmental studies, acquiring land, feasibility studies and/or studies of resources and reserves) and governmental or local stakeholder liaison.

The expenditure milestones by the investor giving a total of 60% of the Project are as follows:

  • Stage 1 Shares: US$250,000 or 3% of the JV
  • Stage 2 Shares: US$750,000 or 9% of the JV
  • Stage 3 Shares: US$4,000,000 or 48% of the JV

The investor can also elect to fast-track expenditure at its discretion.

Bluebird shall not be required to contribute to the costs of the JV/Gubong development up to the completion of Stage 3, providing the Company with a free carry to production.

Both parties realise the potential of Gubong with the Farm-Out representing a major endorsement of the Project’s potential and underpins the joint belief that the relevant permits will be obtained, and that the mine has strong potential to be a bought back into production. The value of Gubong and the Kochang Gold and Silver mine, the smaller of the Company’s South Korean projects, was highlighted in a Scoping Study, which included a post-tax NPV of US$181 million, free cash of US$50 million per annum, an IRR of 111% and a US$630 per oz All in Sustaining Cost (“AISC”). The study was conducted on a USS1,750 per oz Au price compared to the current price of c.US$2,300 per oz.

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