Amarillo Gold Corp. [AGC-TSXV; AGCBF-OTCQB] said Thursday August 8 that it is raising $5 million from a bought deal private placement that will be used to fund a feasibility study at the company’s Mara Rosa open pit project in Brazil. The company hopes to complete the study before the end of 2019.
Amarillo said Mackie Research Capital Corp., the leader underwriter, has agreed to purchase 25 million units of Amarillo at 20 cents per unit. The lead order for the offering is from Eric Sprott, who intends to subscribe for $5 million of the offering, the company said.
Amarillo Gold shares advanced on the news, rising 2.13% or $0.005 to 24 cents on volume of 485,155. The shares are currently trading in a 52-week range of 17.5 cents and 31.5 cents.
Amarillo’s prime asset is the 100%-owned Mara Rosa gold project in central Brazil. The project covers 60,000 hectares of exploration permits and 2,600 hectares of mining permits in the state of Goias. 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.
According to a September 2018 pre-feasibility study, the Mara Rosa Project contains 513,000 ounces of gold in the proven category (9.6 million tonnes at 1.65 g/t gold), and 574,000 ounces of gold in the probable category (14.2 million tonnes at 1.26 g/t gold) for total estimated reserves of 1.08 million ounces (23.8 million tonnes at 1.42 g/t gold).
The Posse Deposit was discovered in 1982 by a predecessor of BHP Billiton Ltd. [BHP-NYSE, BHPLF-OTCPK], via drilling and testing a panned gold-in-soil anomaly in an area mine actively by garimpeiros. BMP Billiton sank a shaft and undertook small scale mining of the oxide ore before forming a joint venture with Western Mining Ltd. in 1988.
It is estimated that 80,000 ounces of gold was extracted from Posse. Of that amount, 31,000 ounces was extracted by Western Mining using heap leaching and a 600 tonne-per-day CIL plant. In 1988, Western Mining Ltd. sold the deposit to Metallica Brasil Ltda. for US$1.5 million.
Amarillo purchased the Posse Deposit from Metallica in October, 2003 for US$450,000. The project carries a 1% NSR to BHP Billiton and a 1% NSR to Franco-Nevada Corp. [FNV-TSX, NYSE.
The Mara Rosa Project has been awarded its main LP permit, which provides the social and environmental permission to mine. Amarillo said it is progressing toward obtaining an installation permit.
Under the terms of the bought deal financing, each unit will consist of one common share and one common share purchase warrant. Each warrant is good to buy one share at a price of 30 cents per warrant share for a period of 24 months after the offering closes.
The underwriter has been granted a greenshoe option to purchase an additional 10 million units at the offering price, a move that could add additional proceeds of $2 million.
The company has also granted the underwriter an option to increase the size of the offering by up to an additional 15% of the total number of units to be issued under the offering, including in respect of any exercise of the upsized offering, at any time on or before 48 hours prior to closing.
The offering is expected to close during the week of August 29, 2019.