REG - Hochschild MiningPLC - Option to acquire Monte Do Carmo project, Brazil

Hochschild MiningAnnouncement

05/03/2024 07:15

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RNS Number : 6097F  Hochschild Mining PLC  05 March 2024

 

 

 

 

 

_____________________________________________________________________________________

 

5 March 2024

 

Option to acquire Monte Do Carmo project, Brazil

 

Hochschild Mining PLC ("Hochschild" or the "Company") (LSE: HOC) (OTCQX:
HCHDF) is pleased to announce that its wholly-owned subsidiary, Amarillo
Mineração do Brasil Ltda. ("Amarillo Mineração") has entered into an
option agreement and certain ancillary agreements (the "Agreements") with
Cerrado Gold Inc. ("Cerrado") (TSXV: CERT) (OTCPK: CRDO.F), pursuant to which
Cerrado has granted Amarillo Mineração the option (the "Option") to acquire
a 100% interest in Cerrado's Monte Do Carmo Project (the "Project") located in
the mining-friendly state of Tocantins, Brazil.

 

The Project, comprising 21 mineral concessions encompassing 82,542 hectares,
hosts multiple identified gold targets along a 30km mineralised trend,
including the principal Serra Alta gold deposit, which hosts a Measured and
Indicated resource of 1,012koz gold and Inferred resource of 66koz gold and
was the subject of a Feasibility Study dated 31 October 2023. The Project
benefits from significant existing site infrastructure including year-round
access via a paved highway and close proximity to the Isamu Ikeda hydropower
plant. Permitting is substantially advanced, with the Environmental Impact
Assessment approved and the Preliminary Licence granted by the Tocantins state
environmental agency in May 2023.

 

In consideration for entering into the Option, Amarillo Mineração has agreed
to advance to Cerrado an amount equal to $15 million by way of 10%
interest-bearing secured loan (the "Signing Loan") and has committed to incur
a minimum of $5 million in exploration expenditures at the Project during a
12.5-month period ending on 19 March 2025 (the "Option Period").

 

At any time during the Option Period, Amarillo Mineração may, at its sole
discretion, elect to exercise the Option to acquire a 100% interest in the
Project by deemed repayment of the Signing Loan, and by making further cash
payments to Cerrado totaling $45 million in the aggregate, in multiple
installments over the next three years, as further described below (together
with the Option, the "Transaction"). Hochschild has provided a guarantee of
the obligations of Amarillo Mineração under the Agreements.

 

Eduardo Landin, Chief Executive Officer of Hochschild, commented:

"We are pleased to have secured the option to acquire Monte Do Carmo, an
exciting project in the mining-friendly state of Tocantins. With the project
holding significantly advanced permitting and compelling exploration upside
potential, the transaction aligns with our strategy of adding high quality,
pre-production assets where our construction, operational and brownfield
exploration expertise provides us with a competitive advantage. With our Mara
Rosa mine, also located in Brazil, in the state of Goiás, recently achieving
first production, we are looking forward to commencing a brownfield
exploration programme at Monte Do Carmo which will allow us to assess the next
steps for its development and its potential to generate sustainable value for
Hochschild and local stakeholders."

 

Transaction Details

Amarillo Mineração has agreed to advance US$15 million by way of 10%
interest-bearing secured loan, advanced in cash as follows:

·      US$7 million has been advanced by Amarillo Mineração (the
"First Advance") on the date of the Option grant;

·      US$1 million to be advanced 60 days after the date of the First
Advance; and

·      US$7 million to be advanced within two business days following
the mailing to Cerrado shareholders of the management information circular to
be prepared in connection with the meeting of Cerrado shareholders at which
management would seek the approval of the shareholders of Cerrado (the
"Cerrado Shareholder Approval").

 

Upon obtaining the Cerrado Shareholder Approval, the Signing Loan, together
with all accrued and unpaid interest thereon and expenses relating thereto,
shall be deemed to be repaid in full by Cerrado by the concurrent set off of
an amount equal to the Signing Loan due by Amarillo Mineração as part of the
Purchase Price. If Cerrado fails to secure the Cerrado Shareholder Approval on
or before 30 June 2024, the Signing Loan will mature on 30 September 2024, at
which time Cerrado will be obliged to: (i) repay the Signing Loan and other
expenses (and any interest accrued thereon) no later than 30 September 2024;
(ii) reimburse Amarillo Mineração for any costs incurred on the Project
between the date of signing of the Agreements and the date of termination of
the Option; and (iii) pay to Amarillo Mineração a break fee in the amount of
US$2.5 million.

 

Amarillo Mineração may exercise the Option at its sole discretion at any
time during the Option Period by providing an exercise notice to Cerrado,
following which an aggregate amount of US$45 million would be payable to
Cerrado prior to the closing of the Transaction in cash as follows
(collectively, the "Consideration"):

 

·      US$10 million following the exercise of the Option;

·      US$20 million upon either: (i) if necessary, the approval of the
Transaction by Hochschild shareholders, which is to occur no later than June
30, 2025; or (ii) if Hochschild shareholder approval is not required, by no
later than 30 March 2025.

·      US$10 million payable within 14 days of the second anniversary of
the date of the Cerrado Shareholder Approval; and

·      US$5 million within 14 days of the earlier of (i) the
commencement of commercial production from the Project, and (ii) 31 March
2027.

 

All amounts owing by Cerrado to, or advanced to Cerrado by, the Company or
Amarillo Mineração, are secured by (i) a first lien on all of the
outstanding equity interests (quotas) in Serra Alto, and (ii) a second lien on
the assets relating to the Project (the "Security"), until termination of the
Option Period (defined below). The security is subject to a security sharing
agreement with another secured creditor.

 

Closing of the Transaction will be subject to a number of conditions,
including: (i) the exercise of the Option by Amarillo Mineração, (ii) the
payment by Amarillo Mineração of the full Consideration, (iii) the approval
of the TSX Venture Exchange, (iv) Cerrado Shareholder Approval, and (v)
satisfaction of other closing conditions customary in a transaction of this
nature.

 

Amarillo Mineração has the right to terminate the Option at any time before
the expiry of the Option Period and will have no further obligation to
Cerrado, other than, if Amarillo Mineração elects to terminate or not to
exercise the Option or material breaches the Agreements, the payment of the
unfunded amount of the Expenditure Requirement. The Transaction will be funded
from Amarillo Mineração's existing funding resources.

 

Cerrado's board of directors has unanimously recommended that Cerrado
shareholders vote in favour of the Transaction. The directors, officers and a
principal shareholder of Cerrado, holding common shares and options reflecting
in aggregate approximately 23.6% of Cerrado's issued and outstanding common
shares on a fully diluted basis, have entered into voting and support
agreements with Amarillo Mineração, pursuant to which they have agreed,
among other things, to vote their Cerrado securities in favour of the
Transaction.

 

The Agreement includes customary deal-protection provisions. Cerrado has
agreed not to solicit or initiate any discussion regarding any other business
combination or transaction involving the direct or indirect disposition of, or
investment in, the Project. If the Option is terminated due to a material
breach thereunder by Cerrado or Serra Alta, then the Signing Loan (to the
extent it remains owing), all Consideration paid by Amarillo Mineração to
Cerrado on or prior to such termination, and other expenses of Amarillo
Mineração, shall be due and payable by Cerrado to Amarillo Mineração.

 

Advisors and Counsel

Hochschild and Amarillo Mineração are being advised by RBC Capital Markets
as financial advisor, Stikeman Elliott LLP as Canadian legal counsel, Bichara
Advogados as Brazilian legal counsel, and Linklaters LLP as UK legal counsel
in connection with the Transaction.

_____________________________________________________________________________________

 

Enquiries:

 

Hochschild Mining PLC

Charlie Gordon
 
                                 +44 (0)20 3709
3260

Head of Investor Relations

 

Hudson Sandler

Charlie Jack
                                  +44 (0)207 796 4133

Public Relations

_____________________________________________________________________________________

 

RBC Capital Markets
                    +44 (0)207 653 4000

Financial Advisor

James Agnew

Hugh Samson

_____________________________________________________________________________________

 

About Hochschild Mining PLC

Hochschild Mining PLC is a leading precious metals company listed on
the London Stock Exchange (HOCM.L / HOC LN) and crosstrades on the OTCQX
Best Market in the U.S. (HCHDF), with a primary focus on the exploration,
mining, processing and sale of silver and gold. Hochschild has over fifty
years' experience in the mining of precious metal epithermal vein deposits and
operates two underground epithermal vein mines: Inmaculada, located in
southern Peru; and San Jose in southern Argentina, and an open pit gold mine,
Mara Rosa, located in the state of Goiás, Brazil.  Hochschild also has
numerous long-term projects throughout the Americas.

 

LEI: 549300JK10TVQ3CCJQ89

________________________________________________________________________________________

 

Forward-looking statements

Certain statements contained in this announcement that are not historical fact
may be "forward-looking" statements. These forward-looking statements are
subject to a number of risks and uncertainties, many of which are beyond the
Company's control and all of which are based on the Company's current beliefs
and expectations about future events. Forward-looking statements are typically
identified by the use of forward-looking terminology such as "believes",
"expects", "may", "will", "could", "should", "intends", "estimates", "plans",
"assumes" or "anticipates" or the negative thereof or other variations thereon
or comparable terminology, or by discussions of strategy that involve risks
and uncertainties. In addition, from time to time, the Company or its
representatives have made or may make forward-looking statements orally or in
writing. Furthermore, such forward-looking statements may be included in, but
are not limited to, press releases or oral statements made by or with the
approval of an authorised executive officer of the Company. These
forward-looking statements, and other statements contained in this
announcement regarding matters that are not historical facts, involve
predictions. No assurance can be given that such future results will be
achieved; actual events or results may differ materially as a result of risks
and uncertainties facing the Company and its subsidiaries. Such risks and
uncertainties could cause actual results to vary materially from the future
results indicated, expressed or implied in such forward-looking statements.

 

The forward-looking statements reflect knowledge and information available at
the date of preparation of this announcement. Except as required by applicable
law and/or regulatory obligations, the Company does not undertake any
obligation to update or change any forward-looking statements to reflect
events occurring after the date of this announcement. Nothing in this
announcement is intended as a profit forecast or estimate for any period and
no statement in this announcement should be interpreted to mean that earnings
or earnings per share or income, cash flow from operations or free cash flow
for the Company for the current or future financial years would necessarily
match or exceed the historical published earnings or earnings per share or
income, cash flow from operations or free cash flow for the Company.

 

 

 

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