Santacruz Silver Signs Agreement to Acquire the Zimapan Mining Assets from Grupo Peñoles
TSX.V: SCZ
FSE: 1SZ
July 28, 2020
Santacruz Silver Signs Agreement to Acquire the Zimapan Mining Assets
from Grupo Peñoles
Vancouver, B.C. – Santacruz Silver Mining Ltd. (TSX.V:SCZ) (the “Company” or “Santacruz” ) through its
wholly owned subsidiary, Carrizal Mining, S.A. de C.V. (“Carrizal”) , has entered into a legally binding term
sheet (the "Term Sheet") with Minera Cedros, S.A. de C.V. (“Minera Cedros”), a wholly owned s ubsidiary of
IndustriasPeñoles, S.A.B. de C.V. to acquire (the "Transaction") the Zimapan property and related assets (the
“Zimapan Mine”) located in Zimapan, Hidalgo State, Mexico for total consideration of US$20 million (plus
applicable Mexican Value Added Tax of US$3.2 million) (the “Purchase Price”).
The Zimapan Mine is currently under lease by Carrizal from Minera Cedros expiring December 31, 2020. The
Zimapan Mine has had a long mining history with recent production for over the past 10 years being carried
out by Carrizal under a mining l ease agreement with Minera Cedros. During this time, mining operations were
based on underground diamond drilling programs. Santacruz completed the acquisition of Carrizal in October
2019.
Assets to be acquired pursuant to the Transaction include:
• Zimapan mill facility (the “Zimapan Mill”) which is a 75,000 dry metric tonnes (DMT) per month facility
with zinc, lead and copper circuits. Over the past five years the Zimapan Mill has produced an annual
average of 12,400 tonnes of zinc, 3,300 tonnes of lead, 1,850 tonnes of copper and 1,290,000 ounces
of silver from an average annual throughput of 700,000 tonnes of mineralized material generating an
average of 4,681,000 ounces silver equivalent* (source: Carrizal mine production records).
• Surface and underground infrastructure including electrical and other necessary infrastructure to car ry
on day to day operations.
• 34 mining concessions covering an area of 5,139 hectares . The mining concessions are located seven
kilometers from the municipality of Zimapan. To date, Carrizal has identified 14 mineral zones that are
characterized as polymetallic replacement mineralization of Pliocene age. Within the mineral zones,
silver, lead, zinc and copper minerals have preferentially replaced the carbonate host rocks and pr e-
existing skarn bodies to produce disseminated, semi -massive sulphide and massive sulphide bodies
that occur in proximity to monzonitic intrusions and quartz-feldspar porphyry dikes.
Pursuant to the Term Sheet, if the parties have not executed definitive agreements relating to the Transaction,
and complete d the Transaction, on or before December 15, 2020 (the "Closing Deadline") , the party
responsible for such lack of performance must pay the other party a break fee in the amount of 20% of the
Purchase Price, subject to the extension provisions described below. Accordingly, if the Company is unable to
secure funding of the entire Purchase Price or is otherwise unable to complete the Transaction by the Closing
Deadline or such later deadline as may result f rom one or more extensions granted by Minera Cedros (as
described below ), then Carrizal will be required to pay a break fee equal to 20% of the Purchase Price to
Minera Cedros.
If Carrizal pays all outstanding royalties owing to Minera Cedros in connection with the existing lease of the
Zimapan Mine , currently amounting to approximately US$1.05 million, on or before October 31, 2020 and
subject to Carrizal maintaining a guaranty through a bank letter of credit or si milar instrument in favor of
Minera Cedros in the amount of US$1 million with an expiry date of February 15, 2021 or later, then Carrizal
has the right to request an extension of the Closing Deadline to January 31, 2021 and can thereafter further
request an extension of the Closing Deadline to M arch 31, 2021 if such guaranty is increased to US$2 million
and the Purchase Price is increased by 10% after December 15, 2020.
Carlos Silva, Santacruz’s CEO, stated, “This would be a transformational transaction for Santacruz to add the
Zimapan Mine, which I have had the privilege to lead throughout the last 12 years , to the Company's existing
mining projects ”. Mr. Silva continued; “This acquisition is expected to pave the way for the future growth of
Santacruz towards becoming a mid -tier silver producer. We wi sh to thank Peñoles management for their
support throughout this process.”
Completion of the T ransaction remains subject to a number of conditions, including receipt of all necessary
regulatory approvals i ncluding approval of the TSX Ve nture Exchange ("TSXV") to the Transaction which will
constitute a "Fundamental Acquisition" pursuant to TSXV Policy 5.3.
* The above Ag Eq references production results and have been calculated using the following metal prices:
2015 Ag Eq was calculated using metal prices of: Ag $17.75/oz, Pb $0.83/lb, Zn $1.09/lb and Cu $2.49/lb.
2016 Ag Eq was calculated using metal prices of: Ag $14.50/oz, Pb $0.76/lb, Zn $0.71/lb and Cu $2.20/lb.
2017 Ag Eq was calculated using metal prices of: Ag $16.00/oz, Pb $1.00/lb, Zn $1.15/lb and Cu $2.81/lb.
2018 Ag Eq was calculated using metal prices of: Ag $17.00/oz, Pb $1.00/lb, Zn $1.35/lb and Cu $2.93/lb.
2019 Ag Eq was calculated using metal prices of: Ag $15.25/oz, Pb $0.94/lb, Zn $1.20/lb and Cu $2.72/lb.
Qualified Persons
The scientific or technical information included in this news release has been reviewed and approved by Van
Phu Bui, P.Geo. of ARC Geoscience Group , who is an independent consultant geologist of the Company and
is a qualified person, pursuant to the meaning of such terms in NI 43-101.
About Santacruz Silver Mining Ltd.
Santacruz is a Mexican focused silver company with one active producing silver project (Rosario) , one project
whose operations have been suspended (Veta Grande) and two exploration proper ties, the Minillas property
and Zacatecas properties. The Company also owns 100% of Carrizal. Carrizal is a private Mexican mining
company, which holds a 20% working interest in the Company´s Zacatecas mineral portfolio and assets and
has the right to operate the Zimapan Mine until December 31, 2020 under a mining lease agreement.
The Company is managed by a technical team of professionals with proven track records in developing,
operating and discovering silver mi nes in Mexico. Our corporate objective i s to become a mid -tier silver
producer.
‘signed’
Arturo Préstamo Elizondo,
Executive Chairman
For further information please contact:
Arturo Prestamo
Santacruz Silver Mining Ltd.
Email: [email protected]
Telephone: (604) 569-1609
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies
of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Forward looking information
Certain statements contained in this news release constitute "forward -looking information" as such term is
used in applicable Canadian securities laws , including statements relating to the agreement with Minera
Cedros and the acq uisition of the Zimapan Mine by the Company . Forward-looking information is based on
plans, expectations and estimates of management at the date the information is provided and is subject to
certain factors and assum ptions. In making the forward -looking statements included in this news release, the
Company has applied several material assumptions, including that the Company's financial condition and
development plans do not change as a result of unforeseen events, an d that future metal prices and the
demand and market outlook for metals will remain stable or improve. Forward -looking information is subject to
a variety of risks and uncertainties and other factors that could cause plans, estimates and actual results to
vary materially from those projected in such forward -looking information. Factors that could cause the
forward-looking information in this news release to change or to be inaccurate include, but are not limited to,
the risk that any of the assumptions re ferred to above prove not to be valid or reliable; there can be no
assurance that the Company will be successful in completing the acquisition of the Zimapan Mine (including
obtaining the necessary funding for the Purchase Price); risk of delays or inabili ty to obtain the approval of the
TSXV to the acquisition of the Zimapan Mine; market conditions and volatility and global economic conditions ,
including increased volatility and potentially negative capital raising conditions resulting from the continued
COVID-19 pandemic and risks relating to t he extent and duration of such pandemic and its impact on global
markets; risk of delay and/or cessation in planned work or changes in the Company's financial condition and
development plans; risks associated with th e interpretation of data (including in r espect of the third party
mineralized material) regarding the geology, grade and continuity of mineral deposits; the uncertainty of the
geology, grade and continuity of mineral deposits and the risk of unexpected var iations in mineral resources,
grade and/or recovery rates; risks related to gold, silver, base metal and other commodity price fluctuations;
risks relating to environmental regulation and liability; the possibility that results will not be consistent with the
Company's expectations, as well as t he other risks and uncertainties applicable to mineral exploration and
development activities and to the Company as set forth in the Company's continuous disclosure filings filed
under the Company's profile at www.sedar.com. There can be no assurance that any forward -looking
information will prove to be accurate, as actual results and future events could differ materially from those
anticipated in such statements. Accordingly, the reader should not place any undue relia nce on forward -
looking information or statements. The Company undertakes no obligation to update forward -looking
information or statements, other than as required by applicable law.
Zimapan Mine
Production at the Zim apan Mine is not supported by a feasibil ity study on mineral reserves demonstrating
economic and technical viability or any other independent economic study under NI 43 -101. Accordingly, there
is increased uncertainty and economic and technical risks of fa ilure associated with production operations at
the Zimapan Mine. Production and economic variables may vary considerably due to the absence of a
complete and detailed site analysis in accordance with NI 43-101.