Under the deal, each share of Amarillo will be exchanged for 40 cents cash and one share of a new Brazil-focused exploration company called Lavras Gold Corp. Lavras SpinCo will be capitalized with $10 million cash and will hold the Lavras do Sul gold project in southern Brazil.
The cash component (excluding the value of the Lavras SpinCo shares) represents a premium of 66% over the 20-day trading day volume weighted average trading price of Amarillo shares on the TSX Venture Exchange of 24 cents.
On November 29, 2021, Amarillo shares closed at 22.5 cents and trade in a 52-week range of 37 cents and 20 cents.
The total transaction value is $164.5 million, excluding Lavras SpinCo’s asset and $10 million in cash.
Hochschild Mining is a British silver and gold mining company with operations in North, Central and South America.
News of the deal comes as Amarillo works to advance two gold projects in Brazil, including the development-stage Posse Gold Project on the Mara Rosa Property in Goias State and the Lavras do Sul Project in Rio Grande do Sul State. Lavras do Sul has more than 23 prospects centred on historic gold workings.
The 100%-owned Mara Rosa gold project covers 60,000 hectares of exploration permits and 2,600 hectares of mining permits. The main accumulation of gold within the Mara Rosa project, also known as the Posse Deposit, occurs in two main zones, Posse North and Posse South.
The Posse Deposit carries a 1% NSR to BHP Billiton and a 1% NSR to Franco-Nevada Corp. [FNV-TSX, NYSE.]
With $32.3 million in cash on hand, Amarillo has been working to evaluate options for raising the balance of construction financing to build the Posse Gold Mine.
Once built, company says it is anticipated that Posse will produce 102,000 ounces of gold per year in its first four years, and have average annual gold production of 84,000 ounces, based on an initial mine life of 10 years. Average recoveries are expected to be 89.9% and the average strip ratio over the life of mine is anticipated to be 4.3.
In a September, 2021 news release, the company said a new discovery at Maria Rosa could be a “game changer” for the project. The company said Pastinho is a new primary gold deposit located approximately 3.5 kilometres north east of the Posse Gold Deposit. “We have defined near surface gold mineralization over potentially mineable widths for a strike length of 1.7 kilometres and to depths of more than 100 metres,” the company said.
“We expect the deposit to develop into another source of future ore feed for the Posse mill,” said Amarillo CEO Mike Mutchler.