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GSilver to Acquire 100% of Great Panther’s Mexican Mining Assets

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GSilver to Acquire 100% of Great Panther’s Mexican Mining Assets

 

 

 

 

 

~Arranges US$14.0M Debt and Equity Financing ~

 

Guanajuato Silver Company Ltd. (TSX-V:GSVR) is pleased to announce that it has signed a binding definitive agreement with Great Panther Mining Ltd. (TSX:GPR) to acquire all of Great Panther’s Mexican assets through the purchase of Great Panther’s Mexican subsidiary, Minera Mexicana Rosario S.A. de C.V. including the producing Topia mine and production facility, the San Ignacio mine, the Guanajuato Mine Complex and the Cata processing plant. GSilver will henceforth refer to GMC as the Valenciana mine.

 

Highlights:

  • GSilver’s operations will expand from two mines and one production facility to five mines and three production facilities.
  • The acquisition includes the Topia mine, located in Durango, Mexico which is currently producing concentrates containing silver, lead, zinc, and gold.
  • Significant lead financing orders have been confirmed from Ocean Partners (UK) Ltd. and from an affiliate of OCIM Metals and Mining.
  • 2021 total silver equivalent production at Topia was 1,129,611 Ag Eq ounces. (1)
  • 2021 total silver equivalent production at the Valenciana and San Ignacio mines and Cata processing plant was 1,051,336 AgEq ounces. (1)
  • Total consideration of USD$14.7M; satisfied by US$6,700,000 in GSilver Shares and US$8,000,000 in cash (see debt and equity financing details below)
  • The transaction Includes the following historical measured, indicated and inferred resources:

 

Valenciana and San Ignacio – Effective Date: July 31, 2021

 

Class Tonnes Ag (gpt) Ag (oz) Au (gpt) Au (oz) AgEq (gpt) AgEq (oz)
Valenciana
Measured and Indicated 251,666 250 2,021,193 1.76 14,280 400 3,235,029
Inferred 220,760 225 1,597,357 1.95 13,873 391 2,776,595
San Ignacio
Measured and Indicated 267,828 145 1,248,734 2.80 24,106 384 3,302,726
Inferred 445,217 178 2,551,719 2.65 38,002 404 5,781,944
Combined
Measured and Indicated 519,493 196 3,269,927 2.30 38,386 391 6,537,755
Inferred 665,977 194 4,149,076 2.42 51,876 400 8,558,540

 

Topia mine – Effective Date: March 31, 2021

 

Class Tonnes Ag (gpt) Ag (oz) Pb (%) Zn (%) AgEq (gpt) AgEq (oz)
Measured and Indicated 331,800 609 1.84 4.40 4.50 1,041 11,107,000
Inferred 274,600 592 1.44 3.35 3.63 932 8,221,000

 

GSilver is not treating these estimates as current mineral resources as a qualified person on behalf of GSilver has not done sufficient work to classify these estimates as current mineral resources. (2)

 

Ramon Davila, President and Director of GSilver said, “This acquisition will prove instantly accretive; the Topia Mine is currently producing and will immediately lift GSilver’s production profile. Within the Guanajuato mining district, the San Ignacio and Valenciana mines were put on care and maintenance less than eight months ago only due to a lack of available tailings facilities; GSilver plans to swiftly re-start production from these mines and process the mineralised material using the excess capacity at our nearby El Cubo production facilities. This acquisition keeps us on course to expeditiously establish GSilver as a mid-tier precious metals producer in Mexico.”

 

Purchase of the Great Panther MMR Assets: 

 

The Company has signed a binding definitive agreement with Great Panther to acquire 100% of the shares of Great Panther’s Mexican subsidiary, MMR. MMR’s combined Mexican assets include three mines, two floatation processing facilities, substantial historical measured, indicated, and inferred resources(2), and 25,000 hectares of mineral claims as more particularly described below.

 

The GP Agreement:

 

Chairman and CEO James Anderson said: “We are delighted to have come to this agreement with Great Panther, and we welcome them becoming a significant shareholder of our Company. The Great Panther Mexican assets fit well into our plan to expand precious metals production in central Mexico. The MMR Acquisition further demonstrates our commitment to consolidating the Guanajuato mining district, which has an established 480-year mining history of precious metals production. The immediate availability of mineralised material from the San Ignacio and Valenciana mines will allow GSilver to fill our El Cubo mill’s excess capacity in Guanajuato. Together with ongoing production from the Topia Mine in Durango, our production expansion will be immediate and substantial. Additionally, the integration of the GSilver mining claims with the claims of Great Panther will open new exploration possibilities in the district that were not possible before this transaction. We thank our European resource lender “OCIM” and our offtake partners “Ocean Partners (UK) Ltd.” for providing important lead financing orders for this transaction.”

 

On closing of the MMR Acquisition GSilver will pay, subject to certain closing adjustments, US$14.7M to Great Panther as follows:

  • US$8.0M in cash, subject to adjustments.
  • US$6.7M in GSilver common shares at a deemed price of C$0.335 per share, for a total of 25,787,200 GSilver shares (the “Consideration Shares”).

 

GSilver has also agreed to pay Great Panther up to an additional US$2.0M in contingent payments based on the following:

  • US$500,000 upon GSilver producing 2,500,000 ounces of silver from the purchased MMR assets.
  • US$750,000 if the price of silver closes at or above US$27.50 per ounce for 30 consecutive days within two years after closing.
  • US$750,000 if the price of silver closes at or above US$30.00 per ounce for 30 consecutive days within three years after closing.

 

Closing of the GP Agreement is subject to satisfaction of certain closing conditions including receipt of all requisite third party approvals and the acceptance of the TSX Venture Exchange (the “TSXV”).

 

Financing for the MMR Acquisition:

 

US$5.0M Credit Facility:

 

GSilver is pleased to announce that it has signed a concentrate pre-payment facility term sheet  with Ocean Partners (UK), a metals off-take and trading firm, to provide US$5.0M of financing to be used as a portion of GSilver’s acquisition price for MMR. The OP Facility will be for a term of 24-months, secured by a share pledge over MMR, which holds the purchased assets, and repayable over a period of 21-months following a three-month grace period. Interest on the loan will be calculated at 12-month libor + 7.5%.

 

GSilver will also grant Ocean Partners 2,500,000 warrants on the same terms as offered to the purchasers of subscription receipts in the proposed equity financing below. In conjunction with the OP Facility, the Company has agreed to sell 100% of the concentrate produced from MMR’s Guanajuato mines including Valenciana and San Ignacio to Ocean Partners for a minimum of 24 months, subject to minimum of 6,000 wet metric tonnes, and 100% of all zinc concentrate produced from the Topia mine for the same period once Topia’s existing zinc concentrate off-take agreement expires within the next month or so. The OP Facility is subject to customary closing conditions including execution of definitive off-take pre-payment and security documentation, and TSXV acceptance.

 

US$9.0M (C$11.55M) Equity Financing:

 

GSilver has received expressions of interest from insiders and “President’s List” investors for an equity financing of approximately US$6.9M including a lead order from an affiliate of Paris and Geneva based resource lender OCIM. OCIM is currently GSilver’s senior lender, having advanced a US$7.5M debt facility in May, 2022.

 

GSilver has entered into an agreement with Research Capital Corporation and Canaccord Genuity Corp. as co-lead agents and joint bookrunners, and on behalf of a syndicate of agents, including Echelon Wealth Partners Inc. and Roth Canada, ULC, pursuant to which the Agents will undertake, on a best-efforts basis, a “part-and-parcel” brokered private placement offering of 35,000,000 subscription receipts of GSilver at a price of C$0.33 (equivalent to approximately US$0.257) per Subscription Receipt, to raise gross proceeds of up to C$11.55 million (equivalent to approximately US$9.0 million). GSilver has also granted the Agents an option to increase the size of the Equity Financing by up to an additional 15% of the Equity Financing or 5,250,000 Subscription Receipts (C$1,1732,500), exercisable in whole or in part at any time up to 48 hours prior to closing of the Equity Financing.

 

The gross proceeds of the Equity Financing, less 50% of the Agents’ cash commission and expenses (see below), will be deposited in escrow pending satisfaction of certain subscription receipt release conditions including the concurrent closing of the GP Agreement and receipt of all necessary regulatory approvals including acceptance of the TSXV.

 

Upon closing of the GP Agreement, each Subscription Receipt will automatically convert, without payment of any additional consideration or further action on the part of the holder thereof, into one unit of GSilver consisting of one common share and one common share purchase warrant of GSilver and the Escrowed Funds and any accrued interest thereon (less the balance of the Agent’s cash commission and expenses) will be released to the Company. Each GSilver Warrant will be exercisable for one GSilver Share at a price of C$0.50 for a period of 36 months following closing of the GP Agreement. If the SR Conditions are not satisfied within 90 days following closing of the Equity Financing (or such other date as the Company and the Agents may agree), the Escrowed Funds and any interest accrued thereon will be returned to the purchasers of Subscription Receipts and the Subscription Receipts will be cancelled.

 

In consideration for their services in connection with the Equity Financing, the Agents will receive a cash commission of 6% of the gross proceeds raised, and brokers’ warrants of 6% of the total number of Subscription Receipts sold, under the Equity Financing (subject to reduced cash commission and Brokers’ Warrants on sales of Subscription Receipts to purchasers on the Company’s Presidents List). Each Broker’s Warrant will entitle the holder thereof to purchase one GSilver Share for a period of 36 months following closing of the GP Agreement at a price equal to the issue price of the Subscription Receipts. The Agents will also be reimbursed for their reasonable expenses incurred in connection with the Equity Financing including legal fees.

 

The net proceeds of the Equity Financing will be used to, among other things, finance the purchase price for the MMR Acquisition, fund ongoing mining operations and for general corporate and working capital purposes.

 

The Equity Financing is scheduled to close on or about the week of July 27, 2022, or such other date as agreed upon between the Company and the Agents and is subject to certain conditions including, but not limited to, the receipt of all necessary approvals including the acceptance of the TSXV.

It is anticipated that certain directors, officers and other insiders of GSilver will participate in the Equity Financing for up to a maximum of 10% of the financing. Such portion of the Equity Financing with Insiders will constitute a “related party transaction” for the purposes of Multilateral Instrument 61-101, Protection of Minority Security Holders in Special Transactions, and GSilver intends to rely upon exemptions from the requirement to obtain a formal valuation and seek minority shareholder approval for the Equity Financing on the basis that the fair market value of the participation by such Insiders in the Equity Financing will be less than 25% of GSilver’s current market capitalization. It is anticipated that the material change report of GSilver to be filed in connection with this announcement of the MMR Acquisition, the OP Financing and the Equity Financing will be filed less than 21 days in advance of the closing of the Equity Financing, which GSilver considers reasonable within the context of current market conditions and to ensure that the net proceeds of the Equity Financing are available to GSilver to fund the purchase price for MMR upon closing of the GP Agreement.

 

All securities issuable in connection with the MMR Acquisition, the OP Facility and the Equity Financing will be subject to a statutory hold period of 4 months and one day from the date of issue. In addition, Great Panther has agreed to certain additional voluntary hold periods on 50% of the Consideration Shares to be released in stages up to 12 months following closing of the GP Agreement.

 

Assets Being Purchased:

 

Valenciana-Cata:

 

Under Great Panther, the mines situated near the centre of Guanajuato were known as the “Guanajuato Mine Complex” or “GMC”; situated along the highly productive Veta Madre. From north to south, these mines are called Guanajuatito, Valenciana, Cata, Los Posos, and Promontorio. Henceforth, GSilver will refer to these mines collectively as “Valenciana” and to the accompanying processing plant, which has nameplate capacity of 1200 tonnes per day, as “Cata”.

 

Mined since the 1500s, and encompassing a strike length of 4.2km, this mine became one of the premier silver mines in the world and, for a time, accounted for up to one-third of global annual silver production.

 

Historical in-situ measured and indicated resources at Valenciana (GMC), as reported by Great Panther (effective date: July 31, 2021) totalled 251,666 tonnes grading 250 gpt Ag and 1.76 gpt Au (400 gpt AgEq) for 3.23M AgEq ounces, with inferred resources of 220,760 tonnes grading 225 gpt Ag and 1.95 gpt Au (391 gpt AgEq) for 2.77M AgEq ounces. See the mineral resources table for Valenciana (GMC) under “Highlights” above. (2)

 

The Cata processing plant remains in good working condition and has a nameplate capacity of 1200 tonnes per day (36,000 tonnes/month). The plant is a traditional crushing, grinding and floatation system that produces a high-grade silver-gold concentrate.

 

Valenciana was put on care and maintenance by Great Panther in November 2021 because of a lack of tailings space.

 

San Ignacio:

 

The San Ignacio Mine is located approximately 20km by road west of the city of Guanajuato and 38km from GSilver’s El Cubo mill. Mineralization exists within an epithermal quartz vein system called ‘La Luz’, which is a large regional tectonic structure that also hosts Endeavour Silver’s Bolanitos Mine.

 

San Ignacio has operated for 10 years, with high grade silver and gold material continually trucked to Great Panther’s Cata mill for processing. GSilver intends to transport material from San Ignacio to El Cubo for processing.

 

Historical in-situ measured and indicated resources at San Ignacio as reported by Great Panther (effective date: July 31, 2021) totalled 267,828 tonnes grading 145 gpt Ag and 2.80 gpt Au (384 gpt AgEq) for 3.30M AgEq ounces, with inferred resources of 445,217 tonnes grading 178 gpt Ag and 2.65 gpt Au (404 gpt AgEq) for 5.78M AgEq ounces. See the mineral resources table for San Ignacio under “Highlights” above. (2)

 

San Ignacio was put on care and maintenance by Great Panther in January 2022 due to a lack of tailings capacity.

 

Topia Mine and Mill, Durango, Mexico.

 

Great Panther has operated the Topia Mine in north-eastern Durango since 2004; the mine includes a 260 tonnes per day flotation processing plant that is currently operating at close to full capacity. The mineral deposits at Topia are different than those seen at Valenciana and San Ignacio, which exclusively produce precious metals. Mineralization at Topia exists as polymetallic epithermal veins that contain high-grade concentrations of silver, zinc, lead and gold. The Topia veins consist mainly of massive galena, sphalerite, and tetrahedrite in a gangue of quartz, barite, and calcite.

 

Historical in-situ measured and indicated resources at Topia as reported by Great Panther (effective date: March 31, 2021) totalled 331,800 tonnes grading 609 gpt Ag, 1.84 gpt Au, 4.4%Pb and 4.5%Zn (1,041 gpt AgEq) for 11.10M AgEq ounces, with inferred resources of 274,600 tonnes grading 592 gpt Ag, 1.44 gpt Au, 3.35% Pb and 3.63%Zn (932 gpt AgEq) for 8.22M AgEq ounces. See the mineral resources table for Topia under “Highlights” above. (2)

 

Topia is currently in operation; the mine produces a lead-silver-gold concentrate and a separate zinc concentrate.

 

Closing of the MMR Acquisition is subject to a number of conditions including acceptance of the TSXV. There are no assurances that the MMR Acquisition, the OP Facility and the Equity Financing will be completed on the proposed terms or at all.

 

Hernan Dorado Smith, a director and officer of GSilver and a “qualified person” as defined by National Instrument 43-101, Standards of Disclosure for Mineral Projects, has approved the scientific and technical information contained in this news release.

 

Advisor and Counsel:

 

GSilver’s financial advisor for the MMR Acquisition is Minvisory Corp. and Gregory T. Chu, A Law Corporation acts as the Company’s legal advisor.

 

About Guanajuato Silver Company Ltd.:

 

GSilver mines and processes silver and gold concentrate from its El Cubo mine and mill. The Company continues to delineate additional silver and gold resources through underground drilling at El Cubo and its nearby El Pinguico project. Both projects are located within 11km of the city of Guanajuato, Mexico, which has an established 480-year mining history.

 

Posted June 30, 2022

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