Cerrado Gold acquires Pan American mine for US$20 million
Cerrado Gold Inc. [CERT-TSXV, CRDOF-OTCQX] said Friday it has agreed to acquire the past-producing Manantial Espejo Mine in Santa Cruz Argentina from Pan American Silver Corp. [PAAS-TSX, NASDAQ]. Under the transaction, Cerrado has agreed to pay a total of US$20 million cash, including an upfront payment of US$10 million on closing, plus deferred payments of US$5.0 million in cash on the first and second anniversaries of the closing date.
Cerrado is securing the asset by acquiring all of the issued shares of Minera Triton Argentina S.A. (MTA), the owner of the mine and related mining concessions. MTA has granted Pan American a 1.0% net smelter return royalty on all future production from the property in settlement of existing debt owed by MTA to Pan American. The NSR royalty is secured by a first degree mortgage over the mining concessions comprising the property and a parent guarantee from Cerrado.
The transaction includes the assumption of all historical, current and future liabilities, including closure liabilities, with the financial closure guarantee required under the Santa Cruz provincial law for approximately US$13.8 million, which the company will satisfy through a financial institution letter of credit, avoiding impact to its working capital position.
MTA has produced 1.4 million gold equivalent ounces (GEOs) with strong silver credits since its inception.
The mine produced 110,000 to 137,500 GEOs between 2009 and 2016 annually and produced 52,000 to 88,000 GEOs between 2017 and 2022 annually. Mining and processing activities concluded at tne end of 2022, after the operation produced 68,000 GEOs in 2022, with mineralized material remaining in place.
Cerrado Gold shares were unchanged Friday at $2.12 and currently trade in a 52-week range of $2.83 and $1.31. Pan American Silver shares were also unchanged at $53.77. The shares trade in a 52-week range of $95.39 and $50.60.
“We are extremely pleased to acquire MTA and the Manantial Espejo mine,’’ said Cerrado CEO and Chairman Mark Brennan. “Based on our due diligence, we have developed a phased redevelopment and refurbishment plan to bring the operation back into production in 2027,’’ he said. “Through additional exploration and development, it is Cerrado’s objective to bring MTA back to historical production levels.’’
Cerrado believes the acquisition positions the company for significant accelerated production growth in Santa Cruz. “With funds available in Argentina to support our development plans, we believe this opportunity should enhance shareholder value without shareholder dilution,’’ Brennan said.
Cerrado is a Toronto-based gold production, development and exploration company with a focus on gold projects in South America. The company is the 100%-owner of both the producing Minera Don Nicolas and Las Calandrias mine in Santa Cruz province, Argentina. In Canada, Cerrado is developing its 100%-owned Mount Sorcier iron ore and vanadium project located outside Chibougamau, Quebec.
The MTA mine was constructed in 2006 and commenced operations in 2008. Mining activities concluded at the end of 2022 and the mine was closed in early 2023, when it was placed on care and maintenance. The site consist of two historical open pit mines and additional underground workings accessed from three portals.