LONDON, UK: Hochschild Mining (LON: HOC) has entered into a definitive agreement with Amarillo Gold Corporation (TSXV: AGC) pursuant to which Hochschild has agreed to acquire all of the issued and outstanding shares of Amarillo at a price of C$0.40 per share in cash.
Pursuant to the transaction, Hochschild will acquire a 100% interest in Amarillo’s flagship Posse gold project 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 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.
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.”