Alamos Gold Inc. (TSX:AGI) (NYSE:AGI) announced that it has entered into a binding agreement to sell its non-core Esperanza Gold Project located in Morelos State, Mexico to Zacatecas Silver Corp. for total consideration of up to $60 million. The Transaction is comprised of the following:

(i) $21 million of total consideration upon closing of the Transaction, including:

• $5 million in cash;
• $10 million of Zacatecas Silver shares (12.14 million common shares at a price of C$1.05) (“Initial Shares”); and
• A silver metal stream valued at approximately $6 million based on consensus long-term silver price estimates. Under the stream, Alamos is entitled to receive 20% of the silver produced from Esperanza at a cash price of 20% of the prevailing spot silver price, subject to a maximum of 500,000 ounces of silver delivered to Alamos.

(ii) $39 million of additional consideration upon the completion of the following milestones:

• $5 million within 60 days following Zacatecas Silver receiving approval of the Environmental Impact Assessment Report for Esperanza;
• $14 million within 60 days of the earlier of (i) completion of a feasibility study on Esperanza, or (ii) Zacatecas Silver announcing a construction decision on Esperanza; and
• $20 million within 180 days of commencement of commercial production from Esperanza.

The sale of Esperanza is consistent with Alamos’ strategy of monetizing and maximizing the value of its non-core assets while focusing on advancing its strong portfolio of high-return growth projects. With the monetization of Esperanza, Alamos has surfaced nearly $100 million in total consideration over the past two years through the sale of non-core assets and gains on the sale of equity securities in other companies.

Upon closing of the transaction, it is expected Alamos will own approximately 15% of Zacatecas Silver common shares outstanding. Combined with the silver stream and Contingent Payments, this will provide Alamos with meaningful ongoing exposure to Esperanza.

With respect to the Contingent Payments, Zacatecas Silver may issue shares to satisfy 50% of such payments, subject to Alamos holding no more than 19.99% of Zacatecas Silver on a partially-diluted basis. The shares are to be issued based on the 10-day volume weighted average trading price prior to the date of issuance.

Additionally, Zacatecas Silver has committed to incur a minimum of $7.5 million over a three-year period following closing of the Transaction, directed to advancing the development of Esperanza and to obtain approval of the Environmental Impact Assessment Report. In the event the minimum spend is not incurred within the three-year period following the closing of the Transaction, the difference between what was spent and the minimum commitment shall be added to the Contingent Payments.

Alamos and Zacatecas Silver will also enter into an investor rights agreement on closing that will provide Alamos, among other things, with: i) the right to designate one nominee for election or appointment to Zacatecas Silver’s Board of Directors as long as Alamos holds at least 10% of Zacatecas Silver’s outstanding shares, and ii) the right to participate in future equity offerings to maintain its pro-rata investment in Zacatecas Silver as long as Alamos holds at least 5% of Zacatecas Silver’s outstanding shares.

The Zacatecas Silver common shares issued to Alamos on closing of the Transaction will be subject to a voluntary hold period of: i) six months for 33% of the Initial Shares, ii) twelve months for 33% of the Initial Shares, and iii) eighteen months for 34% of the Initial Shares.

The Transaction is expected to close in the second quarter of 2022 and is subject to customary closing conditions for a transaction of this nature.

Advisors

Haywood Securities Inc. is acting as financial advisor to Alamos, with Torys LLP acting as legal advisor to Alamos.

About Alamos

Alamos is a Canadian-based intermediate gold producer with diversified production from three operating mines in North America. This includes the Young-Davidson and Island Gold mines in northern Ontario, Canada and the Mulatos mine in Sonora State, Mexico. Additionally, the Company has a significant portfolio of development stage projects in Canada, Mexico, Turkey, and the United States. Alamos employs more than 1,700 people and is committed to the highest standards of sustainable development.