YAMANA GOLD INC. (TSX: YRI; NYSE: AUY) (“Yamana” or the “Company”)
is pleased to announce it has entered into a definitive purchase
agreement (the “Purchase Agreement”) to sell a portfolio of royalty
interests and the contingent payment to be received upon
declaration of commercial production at the Deep Carbonates Project
(“DCP”) at the Gualcamayo gold mine (together, the “Sale
Transaction”) for total consideration of $65 million to Guerrero
Ventures Inc. (TSX-V:GV) (“Guerrero”).
The consideration has been structured to realize
both immediate value for these non-core assets through a cash
component of $20 million and further value from a significant $45
million share position in a newly created, growth-oriented company
with a driven and experienced management team. As a founding
shareholder, Yamana stands to benefit from participation in the new
company, a pure-play precious metals royalty company that has
significant potential upside through mineral resource expansions
and mine life extensions.
The Sale Transaction marks another step in the
Company’s efforts to optimize its portfolio and improve its
financial flexibility. The sales consideration is expected to
advance the Company’s generative exploration program and for other
purposes, including contributing to the Company’s dividend reserve
fund. The Sale Transaction also provides Yamana with a meaningful
stake in a new royalty company that has a strong asset base,
like-minded corporate objectives, and a growth mandate. This model
is similar to the approach that Yamana took with the creation of
its Brio Gold subsidiary, which subsequently became a successful
standalone public company and continues to provide valuation upside
to Yamana today following Brio’s acquisition by Leagold Mining
Corporation and Leagold’s pending merger with Equinox Gold
Corp.
Details of the Sale
Transaction
- Guerrero will acquire two portfolios of precious metals
royalty, stream and gold loan assets from funds related to Orion
Resource Partners (USA) LP (collectively, “Orion”) and Yamana for
total consideration of $268 million and $65 million, respectively
(the “Acquisitions”).
- Yamana’s portfolio of assets being sold under the Sale
Transaction consists of: o 1% net smelter return
royalty (“NSR”) on gold production from the Riacho dos Machados
(“RDM”) gold mine operating in Minas Gerais, Brazil o
2% NSR on oxide gold production from the Gualcamayo gold mine
operating in San Juan, Argentina, once the operation produces
approximately 275,000 ounces from January 1, 2020
o 1.5% NSR on production from the DCP at the
Gualcamayo gold mine o $30 million cash payment
receivable upon declaration of commercial production at the DCP at
the Gualcamayo gold mine o 2% NSR on production
from the Suruca project in Goiás, Brazil
- Guerrero will satisfy the purchase
price under the Sale Transaction to Yamana by issuing $45 million
in common shares of Guerrero at a price of C$0.90 per share and by
paying $20 million in cash (the “Cash Consideration”) on closing.
Guerrero may elect, prior to closing, to pay up to $10 million of
the Cash Consideration through a deferred cash payment (the
“Deferred Cash Payment”), in which event Yamana will receive
interest payable at 3% and the Deferred Cash Payment may be
converted at any time, in whole or in part, by the holder into
shares of Guerrero at C$0.90 per share. While the Deferred Cash
Payment will be due for payment in full at the end of two years,
Guerrero may pay the Deferred Cash Payment at the end of one year,
subject to additional payment by Guerrero equal to 5% of the
Deferred Cash Payment, and the right of Yamana to convert the
Deferred Cash Payment into shares of Guerrero at a price of C$0.90
per share. The instrument creating the Deferred Cash Payment can be
transferred at any time.
- Guerrero intends to fund the
up-front cash component of Yamana’s consideration through a
combination of cash on hand and the proceeds from a proposed
private placement (the “Private Placement”) of subscription
receipts at a price of C$0.90 per subscription receipt. Guerrero
has obtained a lead order of $3 million for the Private
Placement.
- Guerrero will satisfy the purchase
price payable to Orion under the Acquisitions by issuing
$268 million in common shares of Guerrero at a price of C$0.90
per share.
Ownership Position in New Precious
Metals Royalty Company
Upon closing of the Acquisitions, Guerrero
intends to change its corporate name to Nomad Royalty Company Ltd.
(“Nomad”). Orion and Yamana are expected to hold approximately 77%
and 13% of the outstanding shares of Nomad, respectively, on a pro
forma basis, after taking into consideration the conversion into
shares of the subscription receipts to be issued in the Private
Placement, and excluding any shares that may be issued under the
Deferred Cash Payment, if issued.
Pro forma the Acquisitions, Nomad’s combined
portfolio is expected to consist of ten royalty, stream and gold
loan assets, seven of which are currently producing or expected to
begin producing in 2020.
- Orion’s portfolio of assets being acquired under the
Acquisitions consists of:o Gold stream on the Blyvoor
gold mine currently under final construction in the Witwatersrand
Gold Belt, South Africao Gold stream on the operating
Bonikro gold mine in Côte d’Ivoireo Silver stream on
the commissioning Woodlawn zinc-copper mine in New South Wales,
Australiao Silver stream on the operating Mercedes
gold-silver mine in Sonora, Mexicoo Silver stream on
the operating South Arturo gold mine in Nevada, USAo
Gold deliveries under a gold loan made to Premier Gold Mines
Limited
Completion of the Acquisitions is expected to
establish Nomad as a new global, diversified precious metals
royalty company run by a highly-qualified leadership team
consisting of Vincent Metcalfe as Chief Executive Officer and
Joseph de la Plante as Chief Investment Officer. Both executives
have extensive experience and a strong network of relationships
within the mining sector. With the support of Orion and Yamana as
strategic shareholders, Nomad expects to pursue an
acquisition-driven growth platform to scale up, diversify, and
achieve a valuation multiple consistent with the royalty space.
Completion of the Sale
Transaction
Completion of the Sale Transaction is expected
to occur during the second quarter of 2020 and is subject to
standard closing conditions, including approval of the TSX Venture
Exchange. Nomad expects to seek approval from the Toronto Stock
Exchange to graduate from the TSX Venture Exchange and list its
common shares on the TSX.
Upon closing of the Sale Transaction, Yamana
will be entitled to maintain its percentage ownership of the issued
and outstanding common shares of Nomad and have representation on
Nomad’s Board of Directors. These entitlements will remain in
place so long as Yamana’s share ownership of Nomad remains at or
above 10% of the issued and outstanding common shares.
Counsel and Advisors
Yamana has engaged Cassels Brock & Blackwell
LLP as its legal advisors. RBC Capital Markets acted as
financial advisor to Yamana.
About Guerrero VenturesGuerrero
is a publicly listed company with a focus on acquiring mineral
assets that will provide the opportunity to enhance shareholder
value.
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
416-815-02201-888-809-0925Email: investor@yamana.com
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 Company’s strategy,
plans or future financial or operating performance, consummation of
the Sale Transaction and the Acquisitions, including whether
conditions to the consummation of the Sale Transaction will be
satisfied and the timing for completion of the Sale Transaction,
anticipated benefits of the Sale Transaction, expectations
regarding the composition and performance of Nomad’s portfolio of
assets following completion of the Acquisitions. 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 unforeseen
impacts on cash flow, monetization initiatives, and available
residual cash, an inability to maintain a cash reserve fund balance
that can support current or future dividend increases, the outcome
of various planned technical studies, production and exploration,
development, optimizations and expansion plans at the Company's
projects, changes in national and local government legislation,
taxation, controls or regulations and/or change in the
administration of laws, policies and practices, and the impact of
general business and economic conditions, global liquidity and
credit availability on the timing of cash flows and the values of
assets and liabilities based on projected future conditions,
fluctuating metal prices (such as gold, silver and zinc), currency
exchange rates (such as the Brazilian Real, the Chilean Peso and
the Argentine Peso versus the United States Dollar), the impact of
inflation, possible variations in ore grade or recovery rates,
changes in the Company’s hedging program, changes in accounting
policies, changes in mineral resources and mineral reserves, risks
related to asset dispositions, risks related to metal purchase
agreements, risks related to acquisitions, changes in project
parameters as plans continue to be refined, changes in project
development, unanticipated costs and expenses, higher prices for
fuel, steel, power, labour and other consumables contributing to
higher costs and general risks of the mining industry, failure of
plant, equipment or processes to operate as anticipated, unexpected
changes in mine life, final pricing for concentrate sales,
unanticipated results of future studies, seasonality and
unanticipated weather changes, costs and timing of the development
of new deposits, success of exploration activities, permitting
timelines, government regulation and the risk of government
expropriation or nationalization of mining operations, risks
related to relying on local advisors and consultants in foreign
jurisdictions, environmental risks, unanticipated reclamation
expenses, risks relating to joint venture or jointly owned
operations, title disputes or claims, limitations on insurance
coverage, timing and possible outcome of pending and outstanding
litigation and labour disputes, risks related to enforcing legal
rights in foreign jurisdictions, 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. The
forward-looking information contained herein is presented for the
purpose of assisting investors in understanding the Company’s
expected financial and operational performance and results as at
and for the periods ended on the dates presented in the Company’s
plans and objectives and may not be appropriate for other
purposes.
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