VANCOUVER, BC, April 12, 2022 /CNW/ - Zacatecas Silver Corp.
("Zacatecas" or the "Company") (TSXV: ZAC) (OTC: ZCTSF)
(Frankfurt: 7TV) is pleased
to announce that it has completed the acquisition of the advanced
stage Esperanza Gold Project, located in Morelos State,
Mexico pursuant to the terms of 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"). Concurrent with closing of the
transaction, the net proceeds under the previously announced
$19.15 million brokered private
placement of subscription receipts (the "Subscription Receipts")
were released to the Company.
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.
- Alamos becomes significant
cornerstone shareholder of Zacatecas.
- Strong balance sheet to fund development activities at
Esperanza Gold Project and continue drilling activities at the
Zacatecas Silver Property.
The Esperanza Gold Project is 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.
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.
The total consideration of the transaction is approximately
US$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, 12,140,000 common
shares of Zacatecas (with a value of US$10
million) and a silver stream in favour of Alamos valued at US$6
million.
Bryan Slusarchuk, Chief Executive Officer of Zacatecas comments, "This is a
transformational transaction for our company. We look forward to
advancing the high grade oxide gold deposit towards production
while at the same time continuing our accelerating exploration at
our silver project. With the transaction for Esperanza now closed, we also welcome Alamos
Gold as the cornerstone shareholder of Zacatecas and thank them for their
collaboration while executing this transaction. Zacatecas has two excellent projects, is well
funded and has an excellent team of technical professionals
executing the company's business plan. We look forward to working
with all stakeholders as we move forward concurrently at
Esperanza and at Zacatecas."
Dr. Chris Wilson, Chief
Operating Officer and a Director of Zacatecas comments, "Our acquisition of
the Esperanza Gold Project is a tremendous step in moving
Zacatecas 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, where the recent
high grade discovery at Panuco North has added a compelling new
component to our ongoing exploration."
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 acquired 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 paid Minas de Oro
US$5,000,000 and issued 12,140,000
common shares of Zacatecas at a price of $1.05 per share for a deemed value of
US$10,000,000 (the "Consideration
Shares"). Zacatecas now
holds a 100% ownership interest in Esperanza Mexico.
The Share Purchase Agreement also provides that Zacatecas will make certain contingent
payments (the "Contingent Payments") upon key milestones being
accomplished in developing the Esperanza Gold Project.
- 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")
- 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 announcing its decision to commence
construction of a mine on the Esperanza Gold Project (the "FS
Payment")
- pay US$20,000,000 within 180 days
after commencement of commercial production on the Esperanza Gold
Project (the "Production Payment").
Zacatecas 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 (on a partially diluted
basis). The issuance of shares to pay Contingent Payments will be
subject to receipt of approval from the TSX Venture Exchange.
Zacatecas 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 fails to meet the Expenditure
Commitment, an amount equal to the shortfall will be added to the
next Contingent Payment.
The terms of the Transaction regarding the Contingent Payments
were determined in a manner designed to tie key future payments
with meaningful achievements with regards to permitting and
commerciality of operations. The Company has received multiple
permits and regulatory approvals on key projects in Mexico, without delay, and is confident that
it will be able to carry out its planned exploration program
similarly without delay. The Company has team members with a strong
history of permitting projects in Mexico and will continue to monitor and
adjust, working with all stakeholders, to any changes in
regulations as per a best practices approach to community,
environment and the regulatory climate.
The parties also entered 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. The silver stream is limited to 500,000 ounces of
silver. The stream agreement contemplates an amount of
US$6,000,000 that is credited to the
purchase price under the Share Purchase Agreement.
In recognition of Alamos being
a significant shareholder of Zacatecas, Alamos and Zacatecas will enter into an investor rights
agreement that will provide, among other things, a Zacatecas board position to Alamos 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 paid a finder's fee
of US$500,000 to Specialist
Exploration Services LLC (Jacob
Garland) on closing of the Transaction.
Private Placement Financing
As part of closing the Transaction, the proceeds from the
previously announced $19.15 million
brokered private placement of subscription receipts (see news
release dated March 22, 2022) were
released from escrow. As a result, the 17,410,474 subscription
receipts were converted into 17,410,474 units of the Company (each
a "Unit"). Each Unit consists of one common share of the
Company (a "Common Share") and one-half of one Common Share
purchase warrant (each whole Common Share purchase warrant a
"Warrant"). Each Warrant will entitle the holder thereof to
purchase one Common Share at a price of $1.50 per Common Share for a period of 24 months
from the date of issue.
The proceeds raised from the financing were used to satisfy the
US$5,000,000 cash consideration in
connection with the acquisition of the Esperanza Gold Project, and
will be used to advance the Esperanza Gold Project towards
production, fund the ongoing drill program at the Company's
existing silver project, and general working capital purposes.
Clarus Securities Inc. acted as Lead Agent on behalf of a
syndicate of agents that included Eventus Capital Corp., Haywood
Securities Inc. and Canaccord Genuity Corp. Zacatecas paid the
syndicate of agents a cash commission of $998,716 and issued a total of 907,924 common
share purchase warrants (the "Broker Warrants"), with each Broker
Warrant exercisable at $1.10 per
Common Share for a period of 24 months from the date of issue.
The securities issued under the financing will be subject to
restrictions on resale expiring on July 23,
2022.
Certain directors of the Company participated in the private
placement, which constitutes a "related party transaction" for
purposes of Multilateral Instrument 61-101 – Protection of
Minority Security Holders in Special Transactions ("MI
61-101"). The Company is relying on exemptions from the
formal valuation and minority approval requirements in sections
5.5(a) and 5.7(1)(a) of MI 61-101 in respect of these related party
transactions on the basis that the fair market value (as determined
under MI 61–101) of the transactions do not, in aggregate,
exceed 25% of the market value of the Company.
The securities referred to in this news release have not been,
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 absent U.S. registration or
an applicable exemption from the U.S. registration requirements.
This release does not constitute an offer for sale of, nor a
solicitation for offers to buy, any 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. 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. 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 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' limited operating history, its
proposed exploration and development activities on its mineral
properties, the need to obtain permits to carry out exploration
activities on its mineral properties and 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 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 Zacatecas Silver Corp.