Discovery Announces Transformational Acquisition of Newmont’s Porcupine Complex THE BASE SHELF PROSPECTUS IS ACCESSIBLE, AND THE SHELF PROSPECTUS SUPPLEMENT FOR THE PUBLIC OFFERING AND ANY AMENDMENT TO THE DOCUMENTS WILL BE ACCESSIBLE WITHIN
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Discovery Announces Transformational Acquisition of Newmont’s
Porcupine Complex
THE BASE SHELF PROSPECTUS IS ACCESSIBLE, AND THE SHELF PROSPECTUS SUPPLEMENT FOR
THE PUBLIC OFFERING AND ANY AMENDMENT TO THE DOCUMENTS WILL BE ACCESSIBLE WITHIN
TWO BUSINESS DAYS, THROUGH SEDAR+
NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES
• Establishes Discovery as a growing Canadian gold producer with large Mineral Resource
base in a Tier 1 jurisdiction with significant upside potential
• Attractive acquisition with base case NPV of $1.2 billion using analyst consensus gold
prices (including a long-term (“LT”) gold price of $2,150 per ounce) and $2.3 billion at a
+23% sensitivity case using LT gold price of $2,650 per ounce
• Consideration at closing of $275 million, including $200 million of cash and $75 million of
equity, with additional $150 million of deferred cash consideration starting in late 2027
• Attractive $555 million financing package provides substantial financial strength
• Brings to the Porcupine Complex a management team, led by Tony Makuch, with a solid
track record for value creation within the industry and significant experience working in
the Timmins Camp
• Discovery launches C$225 million (approximately $155 million) subscription receipt bought
deal public offering as part of the financing package
All operating and financial estimates in this press release are taken from the technical report entitled, “Porcupine Complex,
Ontario, Canada, Technical Report on Preliminary Economic Assessment”, (the “ Porcupine Technical Report”) filed at
www.sedarplus.ca on or before January 29, 2025. The report includes the results of a preliminary economic assessment which is
preliminary in nature. It includes Inferred Mineral Resources that are considered too speculative geologically to have the
economic considerations applied to them that would enable them to be categorized as Mineral Reserves and there is no certainty
that the estimates will be realized.
January 27, 2025 , Toronto, Ontario - Discovery Silver Corp. (TSX: DSV, OTCQX: DSVSF)
(“Discovery” or the “Company”) is pleased to announce that it has entered into a definitive agreement
(the “Agreement”) to acquire from a wholly owned subsidiary of Newmont Corporation (“Newmont”)
100% of Newmont’s interest in its Porcupine Operations (the “Porcupine Complex” or “Porcupine”)
based in and near Timmins, Ontario, Canada (the “ Timmins Camp”) for total consideration of $425
million (the "Transaction"). All dollar amounts are in US dollars unless otherwise specified.
The consideration to Newmont for the Transaction consists of $200 million in cash (the “Closing Cash
Consideration”) and $75 million payable in common shares of Discovery (the “Closing Equity
Consideration”), both of which are payable upon closing of the Transaction (the “Closing Date”), and
$150 million of deferred consideration ( the “Deferred Consideration”) to be paid in four annual cash
payments of $37.5 million commencing on December 31, 2027.
To fund the Transaction and provide liquidity in support of operating and growing the Porcupine
Complex, Discovery has entered into binding commitments for approximately $555 million of financing
(the “Financing Package”), including $400 million related to royalty and debt agreements with Franco-
Nevada Corporation (“Franco-Nevada”) and approximately $155 million from a bought deal public
NEWS RELEASE
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offering of subscription receipts (the “Public Offering” or “Offering”). Details of the Financing Package
are provided in the section entitled, “FINANCING,” later in this press release.
Tony Makuch, Discovery’s CEO, commented: “ The acquisition of the Porcupine Complex is an
important step forward as we work to build a highly profitable precious metals producer. Through this
acquisition, we are combining growing gold production at Porcupine with tremendous upside, in one of
the world’s great gold camps, with our Cordero project, one of the industry’s leading silver development
projects based on reserves and expected production.
“A key feature of the Transaction is the unique opportunity it provides to combine high-quality gold
production with a leadership team that has extensive experience in the Timmins Camp. On a personal
level, I am from Timmins and have worked extensively in the area, including serving as General
Manager at Hoyle Pond and other sites, and acting as CEO of Lake Shore Gold, which built and
operated the first new major mining operation in Timmins in over two decades (Timmins West Mine).
Other members of our team are also from the area and have similar experience working in various
operational and management roles in Timmins. We know these assets well and have an extensive
understanding of where the v alue creation opportunities exist. We have a deep connection to the
community, including local First Nations groups, and will bring to Timmins the same commitment to
responsible mining that has resulted in Discovery receiving numerous recognitions in Mexico, including
the Mexican Government’s Quality Environmental Certification. 1 In Timmins, the Company is planning
significant investments in site restoration and progressive rehabilitation in order to ensure that all sites
are properly remediated and are available for future use by the community.
“For shareholders, the Transaction is attractive and will establish a new North American precious metals
producer with excellent value creation upside through future operating performance, multiple
development projects and extensive exploration potential. We are also diversifying our portfolio, which
will reduce risk and provide shareholders with significant leverage to both gold and silver prices.
Through our $555 million Financing Package, we will both fund the Transaction and significantly
enhance our balance sheet strength. We will also move forward with Newmont and Franco-Nevada as
new major shareholders, which will provide these companies with an attractive opportunity to participate
in the substantial value we intend to create.”
TRANSACTION HIGHLIGHTS AND RATIONALE
• Establishes Discovery as a new Canadian gold producer with multiple operations in one of the
world’s most prolific gold camps, accounting for approximately 70 million ounc es of total historical
production,2 with a large base of Mineral Resources remaining and substantial exploration upside.
• Adds growing gold production with anticipated average annual production of over 285,000 ounces
during the next 10 years and a total expected mine life of 22 years with substantial upside potential.
• Provides opportunity to unlock value with numerous opportunities identified to increase
production and reduce costs at the Hoyle Pond, Borden and Pamour mines, the potential to upgrade
1 The Quality Environmental Certification was received in both 2023 and 2024 from Mexico’s Federal Attorney’s Office for Environmental
Protection.
2 Refers to total aggregate production from the Timmins Camp (approximately 65 million ounces of total aggregate production from assets
included in the Porcupine Complex (see Porcupine Technical Report page 6-7)).
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the nearly 11.0 million ounce Inferred Mineral Resource 3 at Dome Mine (currently closed) and a
commitment to invest in drilling to realize the significant exploration upside that exists in the Timmins
Camp.
• Allows Discovery’s management team to apply its extensive experience working in the
Timmins Camp to maximize the value of the Porcupine Complex, with over a century of collective
experience in exploration, discovery, development and operations of deposits and mines in the area.
• Attractive acquisition with Porcupine Complex expected to generate significant after-tax free cash
flow and an attractive net present value (“NPV”) at 5% discount rate.
o Free cash flow of $1.3 billion in first 10 years with NPV of $1.2 billion at base case analyst
consensus gold prices4
o Project NPV of $2.3 billion at a +23% sensitivity case using LT gold price of $2,650 per ounce.5
• Positions Discovery to build substantial financial strength through attractive $555 million
financing package and future production from the Porcupine Complex.
• Establishes a diversified portfolio with the strength of the Porcupine Complex to support the
financing, and ultimate development and operation, of the Company’s Cordero silver project
(“Cordero”) in Mexico.
• Creates potential for value creation through multiple expansion and enhanced capital markets
profile with Discovery trading at a substantial discount to mid-tier gold producers.
PORCUPINE OVERVIEW
• The Porcupine Complex consists of the Hoyle Pond and Pamour mine properties and the Dome
mine property and milling facility (collectively “Dome”) in Timmins, Ontario, as well as the Borden
underground mining operation near Chapleau, Ontario.
• Based on the results of a new technical report (see the section, “ PORCUPINE COMPLEX –
TECHNICAL REPORT”, which follows), annual production at the Porcupine Complex is expected to
average more than 285,000 ounces during the next 10 years . Current gold production comes
primarily from Borden, a relatively new mine, with commercial production commencing in 2019, that
is located on a large land position with extensive upside potential , as well as from Hoyle Pond, a
high-grade underground mine, which commenced operations in 1987 and has established a solid
track record for replacing reserves.
• Significant opportunities exist to grow production, reduce costs and/or extend mine life at the
Porcupine Complex. Below is a summary of key opportunities identified to date.
o Hoyle Pond: Improve ventilation, material handling and backfill systems, increase automation,
including expanding the use of tele- remote delivery systems, and evaluate known zones of
mineralization that currently do not have Mineral Resource estimates and were not included
the PEA LOM plan (e.g. TVZ).
3 Inferred Mineral Resources at Dome were not included in the PEA economic analysis.
4 Project economics in the PEA were generated with a base case using CIBC World Markets Inc.’s December 2024 analyst consensus gold
prices, including 2025: $2,576/ounce; 2026: $2,484 per ounce; 2027: $2,437 per ounce; and a LT gold price of $2,150 per ounce beginning
in 2028.
5 Sensitivity case involves gold prices +23% to the base case, including a LT gold price of $2,650 per ounce.
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o Borden: Upgrade the haulage fleet, including increasing the use of electric vehicles, improve
ground support and backfill systems and increase ventilation levels.
o Pamour: Complete development of the Pamour open-pit project. Production is expected to
average approximately 150,000 ounces per year over a 2 1-year mine life (with an additional
year of stockpile processing) . Opportunities to enhance the value of the project include
reducing or eliminating waste-rock rehandling and investigating the use of alternative delivery
systems to replace truck haulage from the open pit to the Dome Mill.
o Dome: Evaluate the opportunity to upgrade the nearly 11.0 million ounce Inferred Mineral
Resource6 and assess the potential for resuming mine production at Dome, where production
ceased in 2017 after over a century of operations.
• Discovery plans to commit significant resources to exploration drilling at the 140,000-hectare total
land position comprising the Porcupine Complex given the considerable potential that exists to
identify new mineralization at or near existing mine infrastructure, as well as the opportunity for new
discoveries at the many regional targets included in the land package.
• The Company plans to make significant investments in mine closure, site re clamation and
rehabilitation to ensure the successful remediation of all current and past operating sites to allow for
their safe and effective use by the community for generations to come. These investments are
included in the economic analysis included in the PEA.
PORCUPINE COMPLEX – TECHNICAL REPORT
As part of the Company’s evaluation of the Porcupine Complex, Discovery has completed a technical
report prepared in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral
Projects (“NI 43-101”) entitled, “Porcupine Complex, Ontario, Canada, Technical Report on
Preliminary Economic Assessment .” The Porcupine Technical Report has an effective date of
January 13, 2025.
The Porcupine Technical Repor t includes the results of a preliminary economic assessment which is
preliminary in nature. The PEA includes Inferred Mineral Resources that are considered too speculative
geologically to have the economic considerations applied to them that would enable them to be
categorized as Mineral Reserves and there is no certainty that the preliminary economic assessment
will be realized.
Following the Closing Date, the Company expects to complete additional studies to more fully evaluate
the growth and optimization opportunities related to the Porcupine Complex.
Porcupine Technical Report Highlights
• Base case NP V of $ 1.2 billion using CIBC World Markets Inc.’s December 2024 analyst
consensus gold prices, including a LT gold price of $2,150 per ounce (the “Base Case”), and $2.3
billion assuming a +23% sensitivity case using a LT gold price of $2,650 per ounce.
6 Inferred Mineral Resources at Dome were not included in PEA economic analysis.
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• After-tax free cash flow7 totaling $1.3 billion over the first 10 years and $1.8 billion over the LOM
at the Base Case gold prices.
• Large base of Mineral Resources including Measured & Indicated Mineral Resources of 3.9
million ounces (69.7 million tonnes (“Mt”) at an average grade of 1.76 grams per tonne (“g/t”) gold)
and Inferred Mineral Resources of 12.5 million ounces (254.5 Mt at 1.53 g/t gold).8
• Growing gold production averaging over 285,000 ounces per year over the next 10 years and
approximately 4.9 million ounces over the 22-year mine life with upside potential, including
opportunities to improve throughput and lower costs at Hoyle Pond, Borden and Pamour and
resume mining operations at the Dome mine.
• Attractive exploration upside with significant drilling planned across the 140,000-hectare land
position in Timmins and at Borden. Potential exists to both extend existing zones and identify new
areas of mineralization at current and past operations and to drill for new discoveries at numerous
regional targets across the Timmins Camp.
• AISC9 averaging $1,504 per ounce over the LOM and $1,278 per ounce from 2030 to 2035.
• Capital expenditures (excluding reclamation costs) totaling $854 million from 2025 to 2030, with
sustaining capital expenditures averaging $110 million per year over the s ame period, total
development capital expenditures of $122 million, almost all related to investments to complete the
Pamour open-pit project in 2025 and 2026, and total planned exploration capital from 2025 to 2030
totaling $69 million, reflecting the significant exploration potential existing at the Porcupine Complex.
BENEFITS OF TRANSACTION FOR DISCOVERY SHAREHOLDERS
• Transforms Discovery into a Canadian gold producer in a Tier 1 jurisdiction with significant upside
potential.
• Provides growing gold production and significant leverage to the gold price during a period of record
gold prices.
• Establishes a solid pipeline for growth through existing development projects as well as by providing
substantial exploration upside with a large land position in one of the world’s most prolific gold
regions.
• Contributes to increased financial strength and supports the financing of future growth initiatives,
including the development of the Cordero silver project.
• Establishes a multi-asset portfolio that improves diversification and provides exposure to both gold
and silver prices.
• Supports value creation by applying the Discovery management team’s extensive experience
operating in the Timmins Camp to the Porcupine Complex.
• Creates re-rate opportunity by transforming Discovery from a developer to a North American
precious metals producer.
7 Example of non-GAAP financial measure – See cautionary note: NON-GAAP FINANCIAL MEASURES.
8 See the section, "PORCUPINE COMPLEX – TECHNICAL REPORT MINERAL RESOURCES" for a breakout of Mineral Resource estimates.
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BENEFITS OF TRANSACTION FOR PORCUPINE COMPLEX STAKEHOLDERS
• Positions the Porcupine Complex as core assets in a portfolio operated by a management team
committed to growing and optimizing the assets to maximize stakeholder value and mine life.
• Discovery recognizes that the skill and expertise of the Porcupine team represents a key strength
and is committed to supporting the existing managers, employees, contractors and suppliers in
continuing to drive the Porcupine Complex forward.
• The Discovery leadership team has deep roots in the Timmins community and will bring a strong
commitment to supporting Timmins and the surrounding area through investment, donations and
other initiatives.
• The Discovery leadership team already has long-standing and positive relationships with local First
Nations groups around Timmins and will ensure that all existing commitments, obligations and
agreements are honoured and will work cooperatively to identify new opportunities to further
strengthen these relationships.
• Discovery fully understands that mining is a privilege, and it will bring the same commitment to
responsible mining to Timmins that has resulted in the Company receiving numerous awards and
distinctions in Mexico. In particular, the Company has included in its financial plan for the Porcupine
Complex significant investment for mine closure and site reclamation and rehabilitation to ensure
that both current operations and legacy sites are successfully remediated and available for future
use by the community.
TRANSACTION SUMMARY AND TIMING
Under the Agreement, Discovery will acquire from a wholly owned subsidiary of Newmont (the
“Subsidiary”) all the issued and outstanding common shares of a newly created entity (the “Porcupine
Entity”) formed to hold 100% of Newmont's interest in the Porcupine Complex (the “Reorganization”).
Total consideration for the Transaction is $425 million (the “ Total Consideration”). The Total
Consideration includes $275 million of consideration payable on the Closing Date, comprising $200
million of Closing Cash Consideration and $75 million of Closing Equity Consideration, and $150 million
of deferred consideration to be paid in four annual cash payments of $37.5 million commencing on
December 31, 2027. The Closing Equity Consideration will be paid through the issuance of an
aggregate of approximately 120 million Discovery common shares, which will be subject to a one-year
lock-up arrangement. Discovery will also assume the environmental liabilities and reclamation
obligations related to the Porcupine Complex.
Discovery anticipates that the Closing Date will occur in the first half of 2025. The Transaction’s closing
is subject to certain conditions, including, among other things, the transfer of the Porcupine Complex
by the Subsidiary to the Porcupine Entity (with the Reorganization being subject to certain approvals,
including the consent of Ontario's Ministry of Mines), receipt of all required regulatory approvals
(including the approval of the Toronto Stock Exchange (“ TSX”) and approval, or expiry of the waiting
period, under the Competition Act (Canada)), and other customary closing conditions for a transaction
of this nature.
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As the total number of shares to be issued to Newmont as part of the Closing Equity Consideration
exceeds 25% of Discovery’s current shares outstanding, shareholder approval (50.1% of shares voting
at the meeting) will be required to issue excess shares beyond such threshold (the “ Additional
Shares”). Discovery's two largest shareholders and directors and officers of Discovery, representing in
the aggregate approximately 35% of the issued and outstanding Discovery shares, have entered into
voting support agreements pursuant to which they have agreed to, among other things, vote their
shares in favour of the issuance of the Additional Shares . If shareholder approval is not obtained, the
value of the Additional Shares, calculated at the Issue Price (defined below) will be added to the first
deferred payment which is due on December 31, 2027. Accordingly, shareholder approval is not a
condition precedent to the closing of the Transaction.
FINANCING
To fund the Closing Cash Consideration and expected capital expenditures and working capital
requirements at Porcupine following the Transaction, and for general corporate and working capital
purposes, Discovery has entered into agreements for a Financing Package totaling $555 million. Of the
total Financing Package, $400 million will be provided through royalty and debt agreements with
Franco-Nevada (the “Franco-Nevada Financing”), with the remainder to be provided through a C$225
million (approximately $155 million Public Offering) as described below. Franco-Nevada will participate
as an approximately $50 million (approximately C$70 million) cornerstone investor in the Public
Offering.
Franco-Nevada Financing:
The $400 million of royalty and debt financing from Franco-Nevada includes:
• $200 million related to a 2.25% LOM net smelter return royalty that will apply to all minerals
produced from the Porcupine Complex;
• $100 million related to a 2.00% net smelter return royalty (the “ Repayable Royalty”) that will
apply to all minerals produced from the Porcupine Complex , which will be extinguished upon
the earlier of Franco-Nevada receiving payments from production attributable to the Repayable
Royalty equal to 72,000 gold ounces or receipt by Franco- Nevada of a one-time early cash
payment from Discovery, at Discovery’s sole option, equal to a 12% pre-tax annual internal rate
of return; and
• $100 million from a senior debt facility (the “Debt Facility”) to fund capital expenditures and
support working capital, with key terms including:
o Funds are available to the Company for two years after the Closing Date, subject to
certain customary conditions
o Interest will be charged at a rate of three-month SOFR plus 450 basis points per annum
o No principal repayments are required for the first five years after the Closing Date,
followed by eight quarterly payments equal to 5.0% of the balance outstanding and a
bullet payment equal to 60.0% on maturity
o The maturity date is seven years and one day from the Closing Date
o Discovery shall pay an upfront fee equal to 2% o n any principal drawn and will pay a
standby fee of 100 basis points per annum on undrawn funds
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o Discovery will issue to Franco-Nevada approximately 3.9 million warrants (the “Franco
Warrants”) with an exercise price equal to C$0.95 per Franco Warrant and a three-year
term
o The Debt Facility will be secured, including by a first ranking security interest on the
Porcupine Complex.
Public Offering
As part of the Financing Package, the Company has also entered into an agreement with BMO Capital
Markets as sole bookrunner and SCP Resource Finance LP (“ SCP”) as co-lead underwriter on behalf
of a syndicate of underwriters (the “ Underwriters”) in connection with a bought deal public offering of
250,000,000 subscription receipts ( the “Subscription Receipts”) at a n issue price of C$0.90
(approximately $0.63) per Subscription Receipt (the “ Issue Price”) for total gross proceeds of
approximately C$225 million (approximately $155 million). Each Subscription Receipt will entitle the
holder to receive, without payment of additional consideration and without further action, one common
share of Discovery upon the satisfaction or waiver of certain release conditions, including the
satisfaction or waiver of all material conditions precedent to the Transaction, other than the payment of
the purchase price (the "Release Conditions"). Discovery has also granted the Underwriters an over-
allotment option (the “ Over-Allotment Option”) to purchase up to an additional 25,000,000
Subscription Receipts (the “Over-Allotment Subscription Receipts”), representing up to 10 % of the
base Offering size, at the Issue Price and on the same terms and conditions as the Offering, exercisable
in whole or in part, at any time and from time to time, for 30 days following the closing of the Offering.
The Offering is expected to close on or about February 3, 2025.
Franco-Nevada has agreed to participate in the Offering to a level of approximately $50 million
(approximately C$70 million), and to accept a two-year lock -up arrangement in relation to Discovery
common shares received through the Offering.
Directors and officers of Discovery, including Tony Makuch, have agreed to participate in the Public
Offering to purchase approximately C$9 million (approximately $6 million) of Subscription Receipts.
The Offering is being made in each of the provinces and territories of Canada other than Québec and
Nunavut. The Subscription Receipts have not been, and will not be, registered under the U.S. Securities
Act of 1933, as amended (the “ U.S. Securities Act ”), and may not be offered or sold in the United
States (as defined in Regulation S under the U.S. Securities Act) except pursuant to exemptions from
the registration requirements of the U.S. Securities Act, and similar exemptions under applicable state
securities laws. The Subscription Receipts will be offered through those Underwriters or their affiliates
who are registered to offer the Subscription Receipts for sale in such jurisdictions and such other
registered dealers as may be designated by the Underwriters. Subject to applicable law, the
Underwriters may offer the Subscription Receipts outside of Canada and the United States. This news
release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered
hereby within the United States or to persons in the United States.
The Subscription Receipts are being offered by way of the P rospectus Supplement to the short form
base shelf prospectus dated March 23, 2023 (the “ Base Shelf ”), with the Prospectus Supplement
providing the full terms related to the Subscription Receipts . Discovery expects to file the Prospectus
Supplement with the securities commissions or other similar regulatory authorities in each of the