Excellon Resources Inc.‘s [EXN-TSX; EXLLF-OTC] said Monday February 24 that it has reached a definitive agreement to acquire Otis Gold Corp. [OOO-TSXV; OGLDF-OTC; 40G-FRA] in a share exchange transaction.
Excellon said the transaction will create a well-funded precious metals producer with a portfolio that includes established silver production in Mexico and an attractive gold development project in the United States.
“The transaction is an initial step in Excellon becoming a larger multi-asset precious metals company,” the company said in press release.
Otis Gold shares jumped 28% or $0.035 to 16 cents on active volume of 1.34 million. The shares are currently trading in a 52-week range of $0.07 and 15 cents.
Excellon shares eased 8.75% or $0.07 to 73 cents and trade in a 52-week range of 69 cents and $1.51.
Under the terms of the transaction, Excellon will acquire all outstanding shares of Otis at a share exchange ratio of 0.23 Excellon shares for each Otis share. Each Otis warrant will become exercisable for Excellon common shares, as adjusted in accordance with the exchange ratio. Each Otis option outstanding will also be exchanged for an Excellon option to acquire Excellon common shares as adjusted in accordance with the exchange ratio.
Based on the exchange ratio, upon completion of the transaction, existing Excellon shareholders will own 74% and former Otis shareholders will own 26% of the combined company.
Excellon’s key asset is the 100%-owned Platosa Mine in Durango, which has been Mexico’s highest-grade silver mine since production started in 2005. Platosa is located within a 14,000-hectare land package with significant opportunity to grow resources near the existing mine infrastructure and identify new deposits regionally.
Excellon will also own 100% of the development stage Kilgore gold project in Idaho. Kilgore is a caldera-related epithermal gold deposit with current indicated resources of 825,000 ounces gold and an inferred resource of 136,000 ounces.
In 2019, Otis Gold completed a Preliminary Economic Assessment that supports the potential for a low capital intensity, low operating cost, open-pit, heap-leach mining operation, which projects an initial capital cost of US$81 million, producing 112,500 ounces of gold annually over a 4.9-year mine life.
Excellon said key benefits of the Otis transaction include the combination of Excellon’s Platosa’s high-grade silver production with the high return and low risk Kilgore development project, creating a pipeline for growth.
The combination can also benefit from active exploration on four key mineral trends, including the CRD and Fresnillo epithermal silver trends in Mexico, the re-emerging Idaho gold region and the historic Freiberg district in Saxony, all known for multi-million-ounce precious metal discoveries.
The combined company will be well financed with US$10 million in cash and available funds and is expected to have a market capitalization of approximately $124 million, Excellon said.