YAMANA GOLD INC. (TSX:YRI; NYSE:AUY) (“Yamana” or the “Company”) is
pleased to announce that it has entered into a definitive agreement
(the “Agreement”) with Monarch Gold Corporation (“Monarch”) whereby
Yamana will acquire the Wasamac property and the Camflo property
and mill (the “Acquisition Properties”) through the acquisition of
all of the outstanding shares of Monarch not owned by Yamana under
a plan of arrangement for consideration, including cash and shares,
of approximately C$152 million. In connection with the plan of
arrangement, Monarch will complete a spin-out (the “Spin-Out”) to
its shareholders, through a newly-formed company (“SpinCo”) of its
other mineral properties and certain other assets and liabilities
of Monarch (collectively, the “Transaction”).
Highlights of
the Transaction
- Adds the
Wasamac project to Yamana’s
Canadian
exploration
portfolio
- Monarch’s principal asset is the
Wasamac gold underground project, located 15 kilometres west of
Rouyn-Noranda in the Abitibi region of Quebec adjacent to the
Trans-Canada highway and Ontario Northland rail line, and 100
kilometres from the Company’s 50%-owned Canadian Malartic
mine.
- Wasamac consists of five well
developed ore shoots within a single, continuous shear zone with a
consistent grade distribution and wide mining widths, making it
amenable to simple, productive, and cost efficient underground bulk
mining methods.
- The project has existing proven and
probable mineral reserves of 1.8 million ounces of gold at 2.56
grams per tonne.(1) Mineral resources and proven and probable
mineral reserves are supported by a Feasibility Study(1) previously
completed by Monarch Gold in 2018 (the “Wasamac Feasibility
Study”), and Yamana completed independent geological modelling,
mineral resources and mineral reserves validations, among other
extensive work, as part of its due diligence reviews to ensure
greater levels of accuracy. There remains excellent potential for
significant future exploration success and mineral resource
conversion, with the deposit remaining open at depth and along
strike.
- As part of its due diligence on the
property, the Company conducted several site visits in full
compliance with provincial protocols for the prevention of
COVID-19.
- The currently defined deposit is
situated at shallow depths in comparison to other Abitibi mines.
Current known mineralization reaches a depth of approximately 800
metres, which offers the opportunity for ramp access at low
relative up-front development costs over a relatively short
development time frame.
- Wasamac fits well into the
exploration and development strategy of the Company, which aims to
develop properties in mining friendly jurisdictions with mineral
inventories of over 1.5 million ounces that can support production
levels of over 150,000 ounces per year that can be built with
internal cash flows.
- The Company plans to build on the
ongoing permitting and social licensing effort carried out by
Monarch, applying Yamana’s strong ESG framework and best practices,
and leveraging the Company’s extensive experience in permitting and
proven track record of building strong, respectful, and mutually
beneficial relationships with the communities and governments
wherever it operates.
- Geology
and mineralization well-suited
to Yamana’s
expertise
- The geological characteristics of
the Wasamac ore body suggest it holds the potential to be an
underground mine achieving the same scale, grade, production, and
costs as Yamana’s successful Jacobina mine in Brazil, and it
possesses many parallels to the Company’s 50%-owned Canadian
Malartic Underground Project located in the same Abitibi region in
Quebec.
- The Company will target increasing
the inventory and perform optimizations to further enhance the
project’s value, advance engineering, and de-risk execution,
leveraging Yamana’s technical expertise and adhering to the
Company’s disciplined capital approach.
- Building off the work completed to
date, Yamana plans to commence an exploration and infill drilling
campaign and other studies to refine and expand upon the potential
of Wasamac and its development alternatives.
- The Company will provide an update
on its plans for the Wasamac project by the third quarter of 2021.
- Other Assets
- The Camflo property, located 15
kilometres northwest of Val-d’Or, includes the old Camflo mine,
which closed in 1992, and a permitted mill. The property has not
been explored since the mid-1980s and Yamana believes it has good
exploration upside. Monarch has digitized historical exploration
data, which Yamana intends to review, after which it will make a
determination whether to commence an exploratory drill
program.
- Total Consideration
Paid
- Under the terms of the Transaction,
Monarch shareholders will receive C$0.63 per Monarch share (the
“Total Consideration”), comprised of: 0.0376 of a Yamana share
(valued at C$0.288 based on the volume weighted average price of
Yamana shares on the TSX for the 20-day period ending on October
30, 2020); C$0.192 in cash; and 0.2 of a share (valued at C$0.15
per Monarch share) of SpinCo, a newly-created exploration company
that will hold Monarch’s remaining pipeline of development and
exploration projects.
- The total Yamana consideration (the
“Yamana Consideration”) is valued at approximately C$152 million
and comprised of 0.0376 of a Yamana share and
C$0.192 in cash per Monarch share. This represents a value
paid of approximately $71(2) per ounce of mineral reserves or
$44(2) per ounce of mineral resources as defined in Wasamac’s
mineral reserve statement for the Wasamac Feasibility
Study.(1)(3)
- The transaction is accretive to
Yamana on all longer-term metrics and is being achieved at an
attractive multiple to NAV and is particularly compelling when
considering the stage of the development of the project and its
location.
Strategic Rationale
The acquisition provides Yamana with a
high-quality project with a significant mineral reserve and mineral
resource base and excellent potential for further expansion. The
acquisition adds to the Company’s footprint in the Abitibi region,
which is consistent with Yamana’s strategy to build on its existing
presence in established mining jurisdictions where it has deep
technical, geological, and operational expertise. In addition, the
acquisition of the Wasamac and Camflo properties adds to Yamana’s
pipeline of organic opportunities, significantly enhancing the
Company’s future growth prospects. The Company has considerable
experience in large bulk tonnage underground mines, experience
which will support the development of Wasamac. Furthermore, the
acquisition aligns with the Company’s strategy for a balanced
approach to capital allocation, as discussed further in the section
that follows.
A Balanced Capital
Allocation Strategy that Includes
Measured Growth
Yamana balances two capital allocation
priorities in addition to paying, maintaining and increasing
dividends, which are balance sheet management and pursuing and
funding growth. In the context of growth, the Company pursues
growth that is measured and consistent with the Company’s size,
scale and financial resources. Opportunities for growth should meet
the Company's minimum requirements that they should be funded
through internal mineral resources, meet minimum return levels that
well exceed cost of capital, and be of a specific size. In terms of
size, opportunities should have mineral reserves and mineral
resources of at least 1.5 million ounces, which the Company
considers large enough to support a mine plan with annual gold
production of approximately 150,000 ounces for at least eight
years. The Company does not categorize opportunities based on their
size alone nor tier assets into various categories. The objective
is to deliver robust returns, significant cash flows, and
accelerated payback. While the Company has a large portfolio of
prospective and advancing exploration and development opportunities
that will provide it with measured growth, as an extension of the
strategy, the Company will consider the acquisition of earlier
stage exploration and development opportunities, particularly where
the Company can provide added value either through its regional
presence, expertise or both. The Company’s due diligence on Wasamac
suggests this transaction meets these criteria.
Transaction
Terms
Under the terms of the Transaction, Monarch
shareholders will receive C$0.63 per Monarch share (the “Total
Consideration”), comprised of: 0.0376 of a Yamana share (valued at
C$0.288 based on the volume weighted average price of Yamana shares
on the TSX for the 20-day period ending on October 30, 2020);
C$0.192 in cash; and 0.2 of a share (valued at C$0.15 per Monarch
share) of SpinCo. Yamana Consideration, including cash and shares,
is valued at approximately C$152 million based on the acquisition
of all outstanding shares of Monarch not already owned by Yamana.
This represents a value paid of approximately $71(2) per ounce of
mineral reserves or $44(2) per ounce of mineral resources as
defined in Wasamac’s mineral reserve statement for its 2018
Feasibility Study.(1) (3)
The Transaction has been approved by the Boards
of Directors of Yamana and Monarch and will require, among other
things, the approval of at least 66 2/3% of the votes cast by
Monarch shareholders at a special meeting of shareholders.
Monarch’s Board of Directors recommends that Monarch shareholders
vote in favour of the Transaction. All of the directors and
officers of Monarch have entered into support agreements with
Yamana pursuant to which they have agreed, among other things, to
vote their Monarch shares in favour of the Transaction. Certain
larger shareholders of Monarch have also entered into support
agreements and together with shares already owned or held by
Yamana, approximately 28% of Monarch’s issued and outstanding
shares would be voted in support of the Transaction. In addition to
Monarch shareholder approval, the Transaction is subject to
applicable regulatory, court, and stock exchange approvals and
certain other closing conditions customary for transactions of this
nature. No approval of Yamana shareholders is required in
connection with the Transaction. The companies are working towards
closing the Transaction during 2020 and not later than early
January 2021.
Anticipated Benefits to
Monarch Shareholders
- Realize immediate value through the
Total Consideration premium to Monarch’s current share price.
- Continue to participate in the
value created from advancing the exploration and development of the
Acquisition Properties supported by Yamana’s financial capability,
operational, and technical experience as well as its familiarity
with the advancement of the Wasamac project.
- Benefit from exposure to Yamana’s
diversified portfolio of producing mines with more than one million
ounces of gold equivalent production per year, a strong balance
sheet, strong and increasing free cash flow generation and
dividends, and an enhanced market profile and liquidity.
- Ownership in SpinCo, a
newly-created exploration company holding Monarch’s remaining
pipeline of development and exploration projects, including the
Beaufor mine, the Croinor property, the McKenzie Break property,
the Swanson property, and the Beacon mill.
- It is expected that Monarch’s
senior executive team will continue in the same roles at SpinCo,
and that SpinCo will have C$14 million in cash to support its work
programs and for general corporate purposes. SpinCo represents an
excellent opportunity for investors to participate in a
well-capitalized company with earlier stage exploration assets
managed by an experienced team of executives and board of
directors.
Mineral Reserve Statement,
Wasamac deposit
|
Proven Mineral Reserves |
Probable Mineral Reserves |
Total Proven & Probable |
|
Tonnes |
Grade |
Contained |
Tonnes |
Grade |
Contained |
Tonnes |
Grade |
Contained |
|
(000's) |
(g/t) |
oz. (000's) |
(000's) |
(g/t) |
oz. (000's) |
(000's) |
(g/t) |
oz. (000's) |
Gold |
1,028 |
2.66 |
88 |
20,427 |
2.56 |
1,679 |
21,455 |
2.56 |
1,767 |
Mineral Resource Statement,
Wasamac deposit
|
Measured Mineral Resources |
Indicated Mineral Resources |
Total Measured & Indicated |
|
Tonnes |
Grade |
Contained |
Tonnes |
Grade |
Contained |
Tonnes |
Grade |
Contained |
|
(000's) |
(g/t) |
oz. (000's) |
(000's) |
(g/t) |
oz. (000's) |
(000's) |
(g/t) |
oz. (000's) |
Gold |
3,990 |
2.52 |
323 |
25,870 |
2.72 |
2,265 |
29,860 |
2.70 |
2,588 |
|
Inferred Mineral Resources |
|
Tonnes |
Grade |
Contained |
|
(000's) |
(g/t) |
oz. (000's) |
Gold |
4,160 |
2.20 |
294 |
All of the assumptions including names of
qualified persons responsible for the mineral reserve and mineral
resource estimates above are available in the Monarch
Gold’s press release dated December 3, 2018.
Counsel and Advisors Yamana has
engaged Cassels Brock & Blackwell LLP as its legal advisors and
Canaccord Genuity Corp. acted as its financial advisor.
Qualified Persons
Scientific and technical information contained
in this news release has been reviewed and approved by Sébastien
Bernier (P.Geo and Senior Director, Geology and Mineral Resources).
Sébastien Bernier is an employee of Yamana Gold Inc. and a
"Qualified Person" as defined by Canadian Securities
Administrators' National Instrument 43-101 - Standards of
Disclosure for Mineral Projects.
About YamanaYamana Gold Inc. is
a Canadian-based precious metals producer with significant gold and
silver production, development stage properties, exploration
properties, and land positions throughout the Americas, including
Canada, Brazil, Chile and Argentina. Yamana plans to continue to
build on this base through expansion and optimization initiatives
at existing operating mines, development of new mines, the
advancement of its exploration properties and, at times, by
targeting other consolidation opportunities with a primary focus in
the Americas.
FOR FURTHER INFORMATION PLEASE
CONTACT:Investor Relations and Corporate
Communications416-815-02201-888-809-0925Email:
investor@yamana.com
Tavistock (UK Public Relations)
Charles Vivian / Emily MossTelephone: +44 7977 297 903 / +44
778 855 4035Email:
yamana@tavistock.co.uk
Peel Hunt LLP (Joint UK Corporate
Broker)Ross Allister / David McKeown / Alexander
AllenTelephone: +44 (0) 20 7418 8900
Berenberg (Joint UK Corporate
Broker)Matthew Armitt / Jennifer Wyllie / Detlir Elezi
Telephone: +44 (0) 20 3207 7800
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS: This news release contains or incorporates by reference
“forward-looking statements” and “forward-looking information”
under applicable Canadian securities legislation and within the
meaning of the United States Private Securities Litigation Reform
Act of 1995. Forward-looking information includes, but is not
limited to information with respect to the timing and outcome of
the Transaction, including required regulatory, court and stock
exchange approvals, the anticipated benefits of the Transaction to
the parties and their respective securityholders, anticipated
strategic and growth opportunities and the anticipated timing of
completion of the Transaction. Forward-looking statements are
characterized by words such as “plan", “expect”, “budget”,
“target”, “project”, “intend”, “believe”, “anticipate”, “estimate”
and other similar words, or statements that certain events or
conditions “may” or “will” occur. Forward-looking statements are
based on the opinions, assumptions and estimates of management
considered reasonable at the date the statements are made, and are
inherently subject to a variety of risks and uncertainties and
other known and unknown factors that could cause actual events or
results to differ materially from those projected in the
forward-looking statements. These factors include the ability of
the parties to receive, in a timely manner and on satisfactory
terms, the necessary regulatory, court and securityholder
approvals; the ability of the parties to satisfy, in a timely
manner, the other conditions to the closing of the Transaction,
other expectations and assumptions concerning the Transaction
changing; as well as those risk factors discussed or referred to
herein and in the Company's Annual Information Form filed with the
securities regulatory authorities in all provinces of Canada and
available at www.sedar.com, and the Company’s Annual Report on Form
40-F filed with the United States Securities and Exchange
Commission. Although the Company has attempted to identify
important factors that could cause actual actions, events or
results to differ materially from those described in
forward-looking statements, there may be other factors that cause
actions, events or results not to be anticipated, estimated or
intended. There can be no assurance that forward-looking statements
will prove to be accurate, as actual results and future events
could differ materially from those anticipated in such statements.
The Company undertakes no obligation to update forward-looking
statements if circumstances or management’s estimates, assumptions
or opinions should change, except as required by applicable law.
The reader is cautioned not to place undue reliance on
forward-looking statements.
(All amounts are expressed in United States Dollars unless
otherwise indicated.)
- Please see the Monarch Gold press release dated December 3,
2018, to view the Wasamac Feasibility Study results.
- Assumes a US dollar to Canadian dollar exchange rate of US$0.75
to C$1.00.
- Mineral reserves of 1.8 million ounces, measured and indicated
mineral resources of 2.6 million ounces, and inferred mineral
resources of 300,000 ounces used in this calculation are based on
the Wasamac Gold Project Feasibility study and are net of Yamana’s
existing Monarch interest in Wasamac.
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