TIDMHOC
RNS Number : 9587T
Hochschild Mining PLC
30 November 2021
________________________________________________________________________________________
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF THE MARKET ABUSE (AMMENT) (EU EXIT) REGULATIONS 2019/310.
For immediate release
30 November 2021
Hochschild Signs Definitive Agreement to Acquire Amarillo
Gold
Hochschild Mining PLC ("Hochschild" or the "Company") (LSE: HOC)
(OTCQX: HCHDF) is pleased to announce that it has entered into a
definitive agreement with Amarillo Gold Corporation ("Amarillo")
(TSXV: AGC) (OTCQB: AGCBF) pursuant to which Hochschild has agreed
to acquire all of the issued and outstanding shares of Amarillo
(the "Transaction") at a price of C$0.40 per share in cash (the
"Cash Offer"). Pursuant to the Transaction, Hochschild will acquire
a 100% interest in Amarillo's flagship Posse gold project ("Posse")
located in Goiás State, Brazil.
In addition, shareholders of Amarillo will receive shares in a
newly formed company, Lavras Gold Corp., which will hold a stake in
the Lavras do Sul project, C$10 million of cash, and a 2.0% net
smelter revenue royalty on certain exploration properties owned by
Amarillo and located outside the current Posse resource and mine
plan at Amarillo's Mara Rosa property. The net acquisition cost to
Hochschild, including the Cash Offer, cash provided to Lavras Gold
Corp. and Amarillo's net cash as at September 30, 2021, is
estimated to be C$135 million.
The Transaction constitutes a Class 1 Transaction under the UK
Listing Rules due to the level of Posse's Proven and Probable
Reserves relative to those of Hochschild. As such, the Transaction
is subject to Hochschild shareholder approval as well as the
approvals of Amarillo shareholders, the Canadian court, regulatory
authorities and the satisfaction of certain other customary
conditions. The Transaction has been unanimously recommended by the
board of directors of Amarillo and has the full support of
Amarillo's major shareholders, Baccarat Trade Investments Ltd. and
Eric Sprott. The board of directors of Hochschild (the "Board")
believes the Transaction is in the best interests of Hochschild's
shareholders. Accordingly, the Board unanimously intends to
recommend that shareholders vote in favour of the Transaction.
Completion is expected to occur in the first quarter of 2022.
Key Acquisition Highlights
-- Aligns with Hochschild's core strengths and long-term
strategy of acquiring and optimising development stage projects in
the Americas
-- Enhances the Company's portfolio by adding a long-life asset
located in a mining friendly jurisdiction
-- Provides exposure to a high-quality project with attractive
costs where certain infrastructure construction is underway
-- Offers compelling near-mine and regional exploration
opportunities
-- Complementary ESG-led approach with strong local community
and government support
-- Maintains Hochschild's financial strength and flexibility
Ignacio Bustamante, Chief Executive Officer, said:
"The acquisition of Amarillo enhances the Company's project
pipeline and is the result of a long-term Company review process of
a wide range of growth opportunities. Posse is an attractive
low-cost project with relatively near-term production and strong
exploration upside potential. With our significant experience in
developing precious metal deposits in the Americas, Hochschild is
ideally placed to take Posse to its next stage and generate strong
sustainable value for the Company and the project's local
stakeholders."
Posse Overview
Posse is an open pit gold project located in Mara Rosa in the
mining friendly jurisdiction of Goiás State, Brazil. The brownfield
project benefits from existing infrastructure and attractive costs.
Construction of certain infrastructure is underway, with the
project having received the License to Install from state
regulators in February 2021 and approval for the power line in
October 2021. Hochschild has revised the Posse mine plan contained
in the August 2020 Definitive Feasibility Study, and will include
further details in a mineral expert's report to be incorporated in
a shareholder circular (the "Circular") to be sent to holders of
Hochschild's ordinary shares ("Hochschild Shareholders") in
connection with the Transaction.
Table 1: Hochschild's Posse Mine Plan Forecasts
Initial Mine Life 10 years
Average Annual Production 80koz Au (100koz Au over the first four years)
-------------------------------------------------
Average Annual AISC US$750/oz Au - US$850/oz Au
-------------------------------------------------
Initial Capex US$180m - US$200m
-------------------------------------------------
Sustaining Capex US$40m
-------------------------------------------------
After-Tax NPV(5%) at US$150m - US$160m
US$1,600/oz Au
-------------------------------------------------
After-Tax IRR at US$1,600/oz
Au 18% - 20%
-------------------------------------------------
After-Tax NPV(5%) at US$200m - US$240m
US$1,800/oz Au
-------------------------------------------------
After-Tax IRR at US$1,800/oz
Au 24% - 26%
-------------------------------------------------
Table 2: Posse NI 43-101 Proven and Probable Reserves
Tonnes Au Au
(Mt) (g/t) (koz)
Proven 11.8 1.20 456
------- ------- -------
Probable 12.0 1.16 446
------- ------- -------
Proven and Probable 23.8 1.18 902
------- ------- -------
Table 3: Posse NI 43-101 Measured, Indicated and Inferred
Resources
Tonnes Au Au
(Mt) (g/t) (koz)
Measured 14 1.2 510
------- ------- -------
Indicated 19 1.1 640
------- ------- -------
Measured and Indicated 32 1.1 1,200
------- ------- -------
Inferred [1] 0.1 0.6 1.7
------- ------- -------
Exploration Potential Overview
Hochschild has identified compelling near-mine and regional
exploration opportunities for Posse and the Mara Rosa property.
Posse is open down plunge to the southwest, providing potential to
extend the mine life near the existing pit shell. There is also an
opportunity to define multiple satellite deposits along the 10 km
Posse structural trend including the Araras, Speti 24 and Pastinho
priority targets. Recent drilling has identified Pastinho as a
promising target with similar geological characteristics to Posse
and multiple parallel gold structures extending from the surface to
approximately 200 m of vertical depth while remaining open. In
addition to the 2,500 hectares of mining concessions containing the
Posse deposit and the 6,000 hectares of exploration concessions on
the Posse structural trend, Hochschild will acquire an additional
59,000 hectares of regional exploration concessions on the Mara
Rosa property.
Transaction Summary and Details
The Cash Offer represents a premium of approximately 66% to the
20-day volume weighted average price of Amarillo's common shares on
the TSX Venture Exchange on 29 November 2021.
The Transaction will be implemented by way of a statutory plan
of arrangement under the Business Corporation Act (British
Columbia). The Transaction will be subject to the approval of 66
2/3% of the votes cast by the holders of Amarillo's common shares
("Amarillo Shareholders") present in person or represented by proxy
at the special meeting relating to the Transaction (the "Special
Meeting"). In addition to security holder approval, the Transaction
is subject to the receipt of court approval and other customary
closing conditions for transactions of this nature.
Amarillo's board of directors has unanimously recommended that
Amarillo Shareholders vote in favour of the Transaction at the
Special Meeting, as the Amarillo directors and officers that hold
securities in Amarillo intend to do in respect of their own
beneficial holdings of Amarillo's securities, representing
approximately 7% of the existing share capital of Amarillo as at 29
November 2021.
Baccarat Trade Investments Ltd., Eric Sprott and the directors
and officers of Amarillo, holding common shares and options
reflecting in aggregate approximately 46% of Amarillo's issued and
outstanding common shares on a fully diluted basis, have entered
into voting and support agreements with Hochschild, pursuant to
which they have agreed, among other things, to vote their Amarillo
securities in favour of the Transaction.
As a Class 1 transaction, it will also require the approval of a
simple majority of the votes cast by Hochschild Shareholders.
Hochschild expects to send the Circular to Hochschild Shareholders
in due course convening a general meeting (the "General Meeting")
to vote on a resolution approving the Transaction.
Hochschild's Board unanimously intends to recommend that
Hochschild Shareholders vote in favour of the Transaction, as each
of the Hochschild directors that holds ordinary shares in
Hochschild intends to do in respect of their own beneficial
holdings, representing approximately 39% of Hochschild's issued
share capital as at 29 November 2021.
Pelham Investment Corporation, an entity controlled by Eduardo
Hochschild and a holder of approximately 38% of Hochschild's issued
and outstanding ordinary shares, has entered into a voting and
support agreement pursuant to which it has agreed, among other
things, to vote its Hochschild ordinary shares in favour of the
Transaction.
The definitive agreement includes customary deal-protection
provisions. Amarillo has agreed not to solicit or initiate any
discussion regarding any other business combination, subject to
customary "fiduciary out" rights. Amarillo has also granted
Hochschild a right to match any superior proposal and will pay a
termination fee of C$5.0 million to Hochschild in certain
circumstances, including if the definitive agreement is terminated
in connection with Amarillo pursuing a superior proposal.
Hochschild has agreed to pay a termination fee of C$2.5 million to
Amarillo if Hochschild terminates the definitive agreement in
certain circumstances or if Hochschild Shareholders fail to approve
the Transaction at the General Meeting.
Further details of the Transaction and the definitive agreement
will be included in the Circular, which will be sent to Hochschild
Shareholders in due course. The Transaction is expected to close in
the first quarter of 2022.
The Transaction will be funded from Hochschild's current cash
balance and/or undrawn credit facility.
Amarillo Financial Information
Amarillo had C$32.3 million of cash, gross assets of C$92.4
million and no debt as at 30 September 2021, and generated a loss
before income tax of C$3.9 million for the year ended 31 December
2020.
Advisors and Counsel
Hochschild has engaged RBC Capital Markets as its financial
advisor, sole sponsor and corporate broker, Stikeman Elliott LLP as
its Canadian legal counsel, Pinheiro Neto Advogados as its
Brazilian legal counsel, and Linklaters LLP as its UK legal counsel
in connection with the Transaction.
A special committee comprised of directors of Amarillo has
engaged Research Capital Corporation as its advisor. Research
Capital Corporation has provided its verbal fairness opinion to
Amarillo's special committee and board of directors, as of the date
of the fairness opinion, and subject to the limitations,
qualifications and assumptions disclosed to Amarillo's special
committee and board of directors in connection therewith, that the
consideration to be received by Amarillo's shareholders pursuant to
the Transaction is fair, from a financial point of view, to
Amarillo's shareholders. The full text of the written fairness
opinion, which describes the assumptions made, procedures followed,
matters considered and limitations and qualifications on the review
undertaken, will be included in Amarillo's management information
circular. Amarillo has engaged Irwin Lowy LLP as its legal counsel
and Osler, Hoskin & Harcourt LLP as counsel to its special
committee in connection with the Transaction.
________________________________________________________________________________________
A webcast will be held at 12pm (London time) on 30 November 2021
for analysts and investors.
To attend, please register at:
https://cossprereg.btci.com/prereg/key.process?key=PD3MC6PNC
________________________________________________________________________________________
Enquiries:
Hochschild Mining PLC
Charlie Gordon
+44 (0)20 3709 3260
Head of Investor Relations
Hudson Sandler
Charlie Jack
+44 (0)207 796 4133
Public Relations
________________________________________________________________________________________
RBC Capital Markets
+44 (0)207 653 4000
Financial Advisor, Sole Sponsor and Corporate Broker
Marcus Jackson
Ryan Latinovich
Hugh Samson
Scott Redwood
________________________________________________________________________________________
About Hochschild Mining PLC
Hochschild Mining PLC is a leading precious metals company
listed on the London Stock Exchange (HOCM.L / HOC LN) and
cross-trades on the OTCQX Best Market in the U.S. (HCHDF), with a
primary focus on the exploration, mining, processing and sale of
silver and gold. Hochschild has over fifty years' experience in the
mining of precious metal epithermal vein deposits and currently
operates three underground epithermal vein mines, two located in
southern Peru and one in southern Argentina. Hochschild also has
numerous long-term projects throughout the Americas.
________________________________________________________________________________________
About Amarillo Gold Corporation
Amarillo is advancing two gold projects located near excellent
infrastructure in mining-friendly states in Brazil. The development
stage Posse gold project is on the Amarillo's Mara Rosa property in
Goiás State. It has a positive definitive feasibility study that
shows it can be built into a profitable operation with low costs
and a strong financial return. Mara Rosa also shows the potential
for discovering additional near-surface deposits that will extend
Posse's mine life beyond its initial ten years. The exploration
stage Lavras do Sul Project in Rio Grande do Sul State has more
than 23 prospects centred on historic gold workings. Amarillo
trades on the TSX Venture Exchange under the symbol AGC and on the
OTCQB under the symbol AGCBF.
________________________________________________________________________________________
Forward-looking statements
Certain statements contained in this announcement that are not
historical fact may be "forward-looking" statements. These
forward-looking statements are subject to a number of risks and
uncertainties, many of which are beyond the Company's control and
all of which are based on the Company's current beliefs and
expectations about future events. Forward-looking statements are
typically identified by the use of forward-looking terminology such
as "believes", "expects", "may", "will", "could", "should",
"intends", "estimates", "plans", "assumes" or "anticipates" or the
negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy that involve risks and
uncertainties. In addition, from time to time, the Company or its
representatives have made or may make forward-looking statements
orally or in writing. Furthermore, such forward-looking statements
may be included in, but are not limited to, press releases or oral
statements made by or with the approval of an authorised executive
officer of the Company. These forward-looking statements, and other
statements contained in this announcement regarding matters that
are not historical facts, involve predictions. No assurance can be
given that such future results will be achieved; actual events or
results may differ materially as a result of risks and
uncertainties facing the Company and its subsidiaries. Such risks
and uncertainties could cause actual results to vary materially
from the future results indicated, expressed or implied in such
forward-looking statements.
The forward-looking statements reflect knowledge and information
available at the date of preparation of this announcement. Except
as required by applicable law and/or regulatory obligations, the
Company does not undertake any obligation to update or change any
forward-looking statements to reflect events occurring after the
date of this announcement. Nothing in this announcement is intended
as a profit forecast or estimate for any period and no statement in
this announcement should be interpreted to mean that earnings or
earnings per share or income, cash flow from operations or free
cash flow for the Company for the current or future financial years
would necessarily match or exceed the historical published earnings
or earnings per share or income, cash flow from operations or free
cash flow for the Company.
Inside information
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (Regulation (EU) No.596/2014) , as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 . Upon the publication of this announcement
via a Regulatory Information Service, this inside information is
shall be considered to be in the public domain.
IMPORTANT NOTICES
RBC Europe Limited ("RBC"), which is authorised in the UK by the
Prudential Regulation Authority and regulated in the UK by the
Financial Conduct Authority, is acting exclusively for the Company
and no one else in connection with the Transaction. RBC will not
regard any other person as a client in relation to the Transaction
and will not be responsible to any person other than the Company
for providing the protections afforded to clients of RBC, nor for
providing advice in connection with the Transaction or any other
matter, transaction or arrangement referred to in this
announcement.
Shareholders and prospective investors will be deemed to have
acknowledged that they have not relied on RBC or any person
affiliated with it in connection with any investigation of the
accuracy of any information contained in this announcement for
their investment decision.
Apart from the responsibilities and liabilities, if any, which
may be imposed on RBC by the Financial Services and Markets Act
2000 or the regulatory regime established thereunder, neither RBC
nor any of its affiliates accept any responsibility or liability
whatsoever for the contents of this announcement, including its
accuracy, completeness or verification, or for any other statement
made or purported to be made by it, or on its behalf, in connection
with the Company or the Transaction, and nothing in this
announcement is, or shall be relied upon as, a promise or
representation in this respect, whether or not to the past or
future. RBC and its affiliates accordingly disclaim all and any
duty, liability or responsibility whatsoever (whether direct or
indirect and whether arising in tort, contract, under statute or
otherwise (save as referred to above)) which it might otherwise
have in respect of this announcement or any such statement.
This announcement is not intended to, and does not constitute or
form part of, and should not be construed as, any offer,
invitation, solicitation or recommendation of an offer to purchase,
sell, subscribe for or otherwise dispose of or acquire any
securities or the solicitation of any vote or approval in any
jurisdiction and neither the issue of the information nor anything
contained herein shall form the basis of or be relied upon in
connection with, or act as an inducement to enter into, any
investment activity. No shares are being offered to the public by
means of this announcement. This announcement does not constitute
either advice or a recommendation regarding any securities, or
purport to contain all of the information that may be required to
evaluate any investment in the Company or any of its securities and
should not be relied upon to form the basis of, or be relied on in
connection with, any contract or commitment or investment decision
whatsoever. Past performance is not an indication of future results
and past performance should not be taken as a representation that
trends or activities underlying past performance will continue in
the future.
The distribution of this announcement in or from certain
jurisdictions may be restricted or prohibited by the laws of any
jurisdiction other than the UK. Recipients are required to inform
themselves of, and comply with, all restrictions or prohibitions in
such other jurisdictions. Any failure to comply with applicable
requirements may constitute a violation of the laws and/or
regulations of other such jurisdiction.
This announcement has been prepared for the purposes of
complying with the applicable law and regulation of the UK
(including the Listing Rules and the Disclosure Guidance and
Transparency Rules) and the information disclosed may not be the
same as that which would have been disclosed if this announcement
had been prepared in accordance with the laws and regulations of
any jurisdiction outside of the UK.
LEI: 549300JK10TVQ3CCJQ89
- ends -
1 Based on limited drilling at depth
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