Hochschild Mining announced, through a material event registered with the London Stock Exchange, that its subsidiary, Amarillo Mineração, exercised the option to acquire 100% of the Monte Do Carmo project from Cerrado Gold Inc., in accordance with the agreement entered into on 5 March 2024.
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The Monte Do Carmo project is located in the state of Tocantins, Brazilwhich is considered a favorable and friendly place for mining.
As consideration for the exercise of the option, prior to the closing date of the transaction, Amarillo Mineração will make additional cash payments to Cerrado Gold Inc. for a total of US$30 million. This amount is in addition to the US$ 15 million that have been considered paid in the context of the transaction, and another US$ 15 million that will be paid in stages after closing, which represents a total consideration of US$ 60 million.
Taking into account the relationship between the level of proven and probable reserves of the Monte Do Carmo project and those of Hochschild Mining, the transaction constitutes a significant transaction in accordance with UK Listing Rules.
On June 27, 2024, Cerrado Gold announced that its shareholders had approved the transaction, the closing of which will be subject to a series of conditions precedent, including: the payment of the Exercise Consideration before closing by Amarillo Mineração; approval from the TSX Venture Exchange – Toronto; and compliance with other customary closing conditions in a transaction of this nature.
Closing of the transaction is expected to take place before November 5. Once the closing has occurred, a separate announcement will be made.
It should be noted that Hochschild Mining’s board of directors unanimously considered that the transaction is in the best interests of Hochschild shareholders as a whole. Eduardo Landin, CEO of the company indicated:
“After the successful launch of Mara Rosa [unidad minera de la compañía en el estado de Goias, Brasil]I am very satisfied to have been able to complete the acquisition of the Monte do Carmo project, located in the neighboring state of Tocantins. We have carried out an extensive exploration and drilling program, which has produced encouraging results and has given us confidence in our ability to define an attractive project. “We believe we have the right team to deliver an exciting opportunity to all interested parties.”
“This transaction allows us to expand our operations abroad, which we will continue to conduct in parallel to our investments in Peru, which demonstrate our confidence in the future of the country,” added Landin.
The Monte Do Carmo Project
The Monte Do Carmo project, comprising 21 mineral concessions spanning 82,542 hectares, hosts multiple gold targets identified along a 30 km mineralized trend, including the main Serra Alta gold deposit, which hosts a measured and indicated resource of 1,012,000 ounces of gold and an inferred resource of 66,000 ounces of gold. In addition, it was the subject of a Feasibility Study dated October 31, 2023. The project benefits from important existing infrastructure in the region, which includes access via paved road, as well as proximity to the Isamu hydroelectric plant. Ikeda. The permitting process is substantially advanced, with the Environmental Impact Assessment approved and the Preliminary License granted by the environmental agency of the state of Tocantins in May 2023.
Since the option agreement was signed in March 2024, Hochschild has executed a 1,704 meter two-hole drilling program that has validated the deposit’s mineral resource estimate. In addition, it has carried out a 4,806 meter resource drilling campaign in five prospective mineralization zones. The campaign has already incorporated additional gold resources that confirm the significant geological potential of the project.
The miner has also designed an exploration plan on seven new targets that will begin in November 2024. Currently, it is expected that, with the results of the exploration of two wells, the potential for additional drilling and several engineering optimizations already identified, the company will be in a strong position to reach an eventual construction decision.
Background and reasons for the transaction
The transaction is the result of Hochschild Mining’s objective to advance its overall corporate strategy of becoming a leading Americas-focused producer of precious metals, with world-class operations located in mining-friendly jurisdictions.
The company believes the transaction is a compelling strategic opportunity to enhance Hochschild Mining’s project pipeline and growth profile by adding a high-quality, long-duration project. The transaction is expected to generate a number of key benefits for Hochschild Mining, its shareholders and other stakeholders.
Financial effects
The consideration corresponding to the transaction will be financed with existing resources. It is expected that by the end of the year there will be no increase in Hochschild’s net debt as a result of the transaction, which, as of September 30, 2024, was US$226.7 million.
As of June 30, 2024, the project had gross assets of US$49 million and generated a loss of US$167,000 in the period between January and June 2024.
Hochschild Mining does not expect the project to generate immediate additional revenue following the transaction as it is currently in the pre-development stage.
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