_____________________________________________________________________________________
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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