Golden Tag buying First Majestic mine for US$33.5 million
Golden Tag Resources Ltd. [GOG-TSXV, GTAGF-OTCQB] has agreed to acquire a 100% interest in the La Parrilla silver mine complex in Durango, Mexico from First Majestic Silver Corp. [FR-TSX, AG-NYSE, FMV-Frankfurt] for US$33.5 million.
The property was acquired by First Majestic in 2004 and became its first silver mine in 2005. Under First Majestic’s ownership, the mill produced 34.3 million ounces of silver equivalent (AgEq) with average annual production of approximately 3.1 million ounces of AgEq.
When placed on care and maintenance in September, 2019, La Parrilla was a fully-permitted mine complex, consisting of five underground high-grade silver mines and an open pit.
“Our short-term objective is to commence exploration within and near-mine workings in order to expand the resource base, to support our ultimate goal and vision of placing the asset back into production,’’ said Golden Tag President and CEO Greg McKenzie. “This is a transformative acquisition for Golden Tag and we strongly believe in the upside resource growth potential of this long-life prolific asset,’’ he said.
The La Parrilla acquisition was announced after the close of trading on December 7, 2022, when Golden Tag shares closed at 22.5 cents. The shares are currently trading in a 52-week range of 36 cents and 12 cents.
Golden Tag’s key asset is the 100% owned San Diego silver project in Durango, Mexico.
The San Diego property is among the largest undeveloped silver assets in Mexico and is located withing the prolific Velardena Mining District. Velardena hosts several mines having produced silver, zinc, lead and gold for over 100 years.
The 92-hectare property is located 75 kilometres southwest of the city of Torreon, and 4.0 kilometres northeast of Golden Minerals Co.’s [AUMN-TSX, NYSE American] San Juana Mine. Golden Minerals holds a 2% net smelter royalty interest in the San Diego property.
The acquisition of La Parrilla is a debt-free transaction with an upfront payment of US$20 million in equity and deferred payments of US$13.5 million, bringing the total acquisition price to US$33.5 million.
Under the deal, First Majestic is set to become Golden Tag’s largest shareholder by acquiring 143.7 million common shares at 19 cents per share. The deferred payments including US$2.7 million on the earlier of 18 months post closing, or upon receipt of certain approvals from the Mexican government.
Also deferred is a US$5.75 million payment that is due when either five million ounces of AgEq reserves are declared from the La Parrilla claims, or 22 million ounces of AgEq of measured and indicated resources are declared from the La Parrilla claims.
The final deferred payment of US$5.05 million is due when a new zone is discovered on the La Parrilla claims, inclusive of a NI 43-101-compliant resource of 12.5 million ounces of AgEq.
After closing, First Majesic will have a participating right to maintain its pro rata interest in Golden Tag (to a maximum of 19.9%) in any future Golden Tag share issuances, subject to customary exceptions.