Zacatecas Silver to Acquire the Advanced Stage and High Grade Oxide Gold Esperanza Project from Alamos Gold Inc.
Zacatecas Silver to Acquire the Advanced Stage and High Grade Oxide
Gold Esperanza Project from Alamos Gold Inc.
VANCOUVER, BC
,
Feb. 28, 2022
/CNW/ - Zacatecas Silver Corp. ("Zacatecas Silver" or the "Company"), (TSX Venture: ZAC) (OTC Markets: ZCTSF)
(
Frankfurt
: 7TV) is pleased to announce that it has entered into a share purchase agreement dated
February 28, 2022
(the "Share Purchase Agreement") with
Minas De Oro Nacional, S.A. De C.V. ("Minas De Oro"), a subsidiary of Alamos Gold Inc. ("Alamos"), to acquire the advanced stage Esperanza Gold Project,
located in Morelos State,
Mexico
(the "Transaction").
Highlights:
Esperanza Gold Project is a high-grade oxide gold deposit with scalable upside.
Historic measured and indicated resource of 34,352,000 tonnes at 0.98 g/t gold and 8.09 g/t silver for 1,084,000 ounces of gold and 8,936,000
ounces of silver and inferred resource of 718,000 tonnes at 0.80 g/t gold and 15.04 g/t silver for 18,000 ounces of gold and 347,000 ounces of
silver (see below for details).
Priority to prepare an updated resource estimate in 2022 and complete a current economic study on the Esperanza Gold Project based on the
updated resource estimate.
To date, significant core and reverse circulation drilling has occurred at the Esperanza Gold Project resulting in a total of 389 drill holes for
69,716 metres of drilling.
Alamos
becomes significant cornerstone shareholder of Zacatecas Silver.
The Esperanza Gold Project as an attractive low-cost, low capital intensity, and low technical risk growth project located in Morelos State,
Mexico
.
Alamos
has
advanced the project through advanced engineering, including metallurgical work, while also focussing on stakeholder engagement including building community
relations.
Through the completion of this transaction, the Esperanza Gold Project will receive the full focus and attention of a proven team of mine builders and financiers
while also providing
Alamos
significant potential upside as the Project is developed with
Alamos
being a large shareholder of Zacatecas Silver.
The total consideration of the transaction is approximately USD
$60 million
with most of the payments not made until significant steps towards commercial
production are achieved. The initial consideration consists of USD
$5 million
in cash, USD
$10 million
in Zacatecas Silver shares and a silver stream in favour of
Alamos
valued at USD
$6 million
.
Bryan Slusarchuk, Chief Executive Officer of Zacatecas Silver comments, "This is a transformational transaction for our company. Prior to entering into this
agreement with
Alamos
, we have been advancing an excellent silver project with a current resource and significant exploration upside.
Zacatecas
has a great
shareholder base and an excellent share structure with just 53 million shares issued and outstanding. Emerging from this transaction with
Alamos
, we maintain
ownership of our current silver projects but will now also have an advanced stage, high-grade, low cost gold project with a clear path to permits and production.
This is among the highest grade oxide gold development stage projects in the world of this size, and we look forward to working with all stakeholders to
advance the project into production.
We are also exceptionally pleased that
Alamos
has expressed confidence in the project and the technical team via their share ownership in Zacatecas Silver.
I've been fortunate to have been involved transacting with large gold companies in the past on divestitures and this has created some outstanding wins for
shareholders. In this case, we appreciate the fact that
Alamos
will become an important shareholder of the Company as we move the project forward."
In conjunction with this transaction, Zacatecas Silver has arranged a CAD
$15 million
private placement financing to increase the size of our treasury as we satisfy
the initial USD
$5 million
cash consideration, begin advancing
Esperanza
towards production, fund the ongoing drill program at the Company's existing silver
project and general working capital.
Dr.
Chris Wilson
, Chief Operating Officer and a Director of Zacatecas Silver comments,
"Our acquisition of the Esperanza Gold Project is a tremendous step in
moving Zacatecas Silver towards becoming a serious precious metals producer. The Esperanza Gold Project represents one of the best undeveloped open pit
deposits in
Mexico
and will complement our high-grade silver resource Zacatecas Properties. This is extremely exciting for a technical team and all
shareholders of Zacatecas Silver."
Esperanza Gold Project
The Esperanza Gold Project is an advanced stage, low technical risk growth project located in Morelos State, Mexico.
Alamos
has reported a resource estimate of a measured and indicated resource of 34,352,000 tonnes at 0.98 g/t gold and 8.09 g/t silver for 1,084,000 ounces of
gold and 8,936,000 ounces of silver and inferred resource of 718,000 tonnes at 0.80 g/t gold and 15.04 g/t silver for 18,000 ounces of gold and 347,000 ounces
of silver. The Company has not independently verified this resource estimate and is not treating this resource estimate as a current resource. See below for
further details.
To date, significant core and reverse circulation drilling has occurred at the Esperanza Gold Project resulting in a total of 389 drill holes for 69,716 metres. Four
targets adjacent to or close to the historical resource were identified to expand the historical resource. The project also hosts seven regional targets that also
merit drill testing.
Mineralization at the Esperanza Gold Project is associated with the intrusion of a stock of Granodiorite composition into the carbonate rocks of Guerrero-Morelos
Platform, specifically the rocks of Xochicalco Formation. Spatially related to the intrusive contact with the carbonate rocks are varying degrees of skarn and
marble development. Intruded by the granodioritic stock are the limestone of the Xochicalco Formation of Aptian age (early Cretaceous), that have beds of
varying thickness from very thin to medium. Primary mineralization consists of gold, and to a lesser extent silver, associated with the skarn zones spatially related
to the intrusive.
Based on previous preliminary assessments completed by previous owners, the Company anticipates that the project would be amenable to a conventional open
pit, heap leach operation with two-stage crushing. Crushed material would be conveyed to the leach pad and irrigated with dilute cyanide solution. Gold will be
recovered from pregnant solutions utilizing carbon adsorption, subsequent electrowinning and on-site smelting to produce gold and silver doré bars.
The Company plans to carry out an extensive work program to prepare an updated resource estimate, undertake economic studies on the project, and conduct an
infill drill program on the deposit as well as drilling on nearby exploration targets.
Terms of the Transaction
Under the terms of the Share Purchase Agreement, Zacatecas Silver has agreed to acquire all the issued and outstanding shares of Esperanza Silver de
Mexico
,
S.A. de C.V. ("Esperanza Mexico"), which holds title to the Esperanza Gold Project In consideration of
Esperanza Mexico
,
Zacatecas
has agreed to pay Minas de
Oro US
$5,000,000
and issue a total of 12,140,000 common shares of Zacatecas Silver at a price of
$1.05
per share for a deemed value of US
$10,000,000
(the
"Consideration Shares") on closing of the Transaction. Upon satisfaction of these payments and entering into the silver stream agreement, Zacatecas Silver will
be transferred 100% ownership of
Esperanza Mexico
.
The Share Purchase Agreement further provides that Zacatecas Silver will make certain contingency payments (the "Contingent Payments") upon key milestones
being accomplished in developing the Esperanza Gold Project.
(a)
pay US $5,000,000 within sixty (60) days after approval of an Environmental Impact Assessment Report by the applicable governmental authorities (the "EIA Payment")
(b)
Pay US $14,000,000 within 60 days of the earlier of (i) completion of a feasibility study on the Esperanza Gold Project or (ii) Zacatecas Silver announcing its decision to commence construction of a mine on the Esperanza Gold Project (the "FS Payment")
(c)
Pay US $20,000,000 within 180 days after commencement of commercial production on the Esperanza Gold Project (the "Production Payment").
Zacatecas Silver may, at its sole election, satisfy up to 50% of the Contingent Payments by issuing shares at a price equal to the 10 day VWAP prior to the
issuance of such shares provided that such share issuance does not cause
Alamos
to exceed 19.99% of the issued and outstanding shares of Zacatecas Silver
(on a partially diluted basis).
Zacatecas Silver has also agreed to incur US
$7,500,000
in expenditures to advance the Esperanza Gold Project over the next three years, excluding G&A (the
"Expenditure Commitment"). If Zacatecas Silver fails to meet the Expenditure Commitment, an amount equal to the shortfall will be added to the next Contingent
Payment.
On closing of the Transaction, the parties will also enter into a stream agreement that will provide that
Alamos
may purchase up to 20% of any silver produced
from the Esperanza Gold Project with a transfer price of 20% of the market price payable to Zacatecas Silver. The silver stream is limited to 500,000 ounces of
silver. The stream agreement contemplates an amount of US
$6,000,000
that will be credited to the purchase price under the Share Purchase Agreement.
In recognition of
Alamos
being a significant shareholder of Zacatecas Silver,
Alamos
and Zacatecas Silver will enter into an investor rights agreement that will
provide, among other things, a board position to Zacatecas Silver and a right of first refusal to maintain its share position on any future financings. Pursuant to the
terms of the investor rights agreement that will be entered into on the closing of the Transaction, the Consideration Shares will be subject to the following voluntary
restrictions on resale: (i) 33% will be restricted for a period of six months from closing of the Transaction, (ii) an additional 33% will be restricted for a period of
twelve months from closing of the Transaction, and (iii) 34% will be restricted for a period of eighteen months from closing of the Transaction.
Zacatecas Silver will also pay a finder's fee of US
$500,000
on closing of the Transaction. The Share Purchase Agreement and the transactions contemplated
therein are subject to customary conditions for transactions of similar size, completion of the Financing by Zacatecas Silver and approval of the TSXV Venture
Exchange.
Private Placement Financing
As part of the Transaction, Zacatecas Silver will complete a brokered private placement of up to 13,636,364 subscription receipts (a "Subscription Receipt") at a
price of
$1.10
per Subscription Receipt for total proceeds of up to
$15,000,000
(the "Offering"). The Subscription Receipts will be convertible into units (each a
"Unit") upon satisfaction of the closing conditions of the Transaction. Each Unit will consist of: (i) one common share (each a "Common Share"), and (ii) one-half
of one common share purchase warrant (the "Warrants"), Each whole Warrant will entitle the holder purchase a Common Share at an exercise price of
$1.50
for
a period of 24 months following closing of the Offering. The lead agent will be announced by the Company in a subsequent news release.
Zacatecas Silver intends to use the net proceeds of the offering for the acquisition, exploration and development of the Esperanza Gold Project, exploration of the
Zacatecas Properties and for general working capital purposes.
Closing of the Offering is subject to regulatory approval including that of the TSX Venture Exchange.
The securities being offered have not, nor will they be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold
within
the United States
or to, or for the account or benefit of, U.S. persons in the absence of U.S. registration or an applicable exemption from the U.S.
registration requirements. This release does not constitute an offer for sale of securities in
the United States
.
Qualified Person
The contents of this news release have been reviewed and approved by
Chris Wilson
, B.Sc. (Hons), PhD, FAusIMM (CP), FSEG, Chief Operating Officer of
Zacatecas Silver. Dr. Wilson is a Qualified Person as defined by NI 43-101 and is responsible for all technical information in this news release.
Alamos Resource Estimate
Alamos
reported in its most recent annual information form a resource estimate of a measured and indicated resource of 34,352,000 tonnes at 0.98 g/t gold and
8.09 g/t silver for 1,083,366 ounces of gold and 8,936,201 ounces of silver and inferred resource of 718,000 tonnes at 0.80 g/t gold and 15.04 g/t silver for
18,375 ounces of gold and 347,192 ounces of silver. The Company considers this to be an historical resource for the purposes of National Instrument 43-101.
Resource blocks were defined using with dimensions of 10 x 10 x
5 m
. The estimation of grades was performed with the ordinary kriging method on capped
composites. An added step in the estimation strategy was the utilization of the dynamic anisotropy technique in
Vulcan's
unfolding options. This added capability
allows for a more realistic outcome of the estimated grade's spatial distribution as it follows the folded shape of the deposit. Assumptions used in the resource
include the following metal prices: gold price of US
$1,400
/oz and silver price of US
$22
/oz. The resource assumed the following economic assumptions: recovery
of 60.4% at 0.2 g/t to 71.9% at 1.6 g/t for gold, 25% for silver,
$2.60
/t mining costs,
$0.64
/t General and Administrative costs,
$4.20
/t milling costs and a pit
slope of 45 degrees. The Company considers the resource relevant due to its identification and modelling of the
Esperanza
deposit.
The Company has not done sufficient work to classify the resource as a current mineral resource or mineral reserves, and the Company is not treating the
historical estimate as current mineral resources or mineral reserves. Although the resource estimate is considered reliable, the Company will re-sample a portion
of the drill core for the purpose of carrying out a new resource estimate. Further, additional data verification including resurveying of select diamond drill holes
collars; review of graphic drill core logs, comparison of these logs with remaining half-cut core, and a cross-check of select geological logs agonist database
entries; and a check of original assay certificates against the assays and drill hole database.
Advisors
Osler
, Hoskin & Harcourt LLP is acting as legal advisor to Zacatecas Silver. Haywood Securities Inc. is acting as financial advisor to
Alamos
, with Torys LLP
acting as legal advisor to
Alamos
.
About Zacatecas Silver Corp.
The Zacatecas Silver property is in Zacatecas State,
Mexico
, within the highly prospective Fresnillo Silver Belt, which has produced over 6.2 billion ounces of
silver. The company holds 7,826 ha (19,338 acres) of ground that is highly prospective for low and intermediate sulphidation silver-base metal mineralization and
potentially low sulphidation gold-dominant mineralization. On
December 15, 2021
,
Zacatecas
announced a mineral resource estimate at the Panuco Deposit
consisting of 2.7 million tonnes at 187 g/t AgEq (171 g/t Ag and 0.17 g/t Au) for 16.4 million ounces AgEq (15 million ounces silver and 15 thousand ounces gold)
(see news release dated
December 15, 2021
).
The property is 25 km south-east of MAG Silver Corp.'s Juanicipio Mine and Fresnillo PLC's Fresnillo Mine. The property shares common boundaries with Pan
American Silver Corp. claims and El Orito which is owned by Endeavour Silver. There are four main high-grade silver target areas within the
Zacatecas
concessions: the Panuco Deposit, Muleros, El Cristo and San Manuel-San Gill. The Property also includes
El Oro
, El Orito,
La Cantera
, Monserrat, El Peñón,
San
Judas
and
San Juan
silver-base metal vein targets. These targets are relatively unexplored and will be the focus of rapid reconnaissance.
About Alamos Gold Inc.
Alamos
is a Canadian-based intermediate gold producer with diversified production from three operating mines in
North America
. This includes the
Young
-
Davidson
and Island Gold mines in northern
Ontario, Canada
and the Mulatos mine in Sonora State,
Mexico
. Additionally, the Company has a significant
portfolio of development stage projects in
Canada
,
Mexico
,
Turkey
, and
the United States
.
Alamos
employs more than 1,700 people and is committed to the
highest standards of sustainable development. The Company's shares are traded on the TSX and NYSE under the symbol "AGI".
On behalf of the Company
Bryan Slusarchuk
Chief Executive Officer and Director
Forward-Looking Statements
Information set forth in this news release contains forward-looking statements that are based on assumptions as of the date of this news release. These
statements reflect management's current estimates, beliefs, intentions and expectations. They are not guarantees of future performance. Zacatecas Silver
cautions that all forward looking statements are inherently uncertain and that actual performance may be affected by many material factors, many of which are
beyond their respective control. Such factors include, among other things: risks and uncertainties relating to Zacatecas Silver's limited operating history, its
proposed exploration and development activities on is Zacatecas Properties and the need to comply with environmental and governmental regulations.
Accordingly, actual and future events, conditions and results may differ materially from the estimates, beliefs, intentions and expectations expressed or implied in
the forward-looking information. Except as required under applicable securities legislation, Zacatecas Silver does not undertake to publicly update or revise
forward-looking information.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Exchange) accepts responsibility for
the adequacy or accuracy of this release.
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SOURCE
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For further information:
Adam Ross, Investor Relations, Direct: (604) 229-9445, Toll Free: 1(833) 923-3334, Email: [email protected]
CO: Zacatecas Silver Corp.
CNW 13:30e 28-FEB-22