Leagold Mining (LMC.H-V) Jan 12, '17 is pleased to announce that it has entered into a binding sale and purchase agreement with Goldcorp (G-T) dated January 11, 2017 to acquire the Los Filos Gold Mine in Guerrero State, Mexico for US$350 million through the purchase of Goldcorp's Desarrollos Mineros San Luis S.A. de C.V. ("DMSL") subsidiary. The purchase price is made up of US$279 million in cash and US$71 million in common shares of Leagold. Based on Leagold's transaction financing plan, Goldcorp is expected to become an approximate 30% shareholder of Leagold at completion of the Acquisition. Goldcorp will have the right to nominate a director to Leagold's Board at completion of the Acquisition.
The Los Filos operation consists of two open-pit mines, Los Filos and El Bermejal, an underground mine at Los Filos and the opportunity to develop an underground mine at El Bermejal. Gold is recovered from crushed and run-of-mine ore via a conventional, low-cost heap leach process. A National Instrument 43-101 independent Technical Report, that will include detailed information on Los Filos and the potential underground mine at El Bermejal, is being prepared by Stantec Consulting International LLC. This report is expected to be filed on SEDAR in late January 2017. This is a preliminary news release regarding this Acquisition and Leagold will provide additional information in a comprehensive news release when contents of the 43-101 are available. Leagold advises that its common shares will remain halted from trading on the TSX Venture Exchange ("TSX-V") until further notice.
Neil Woodyer, CEO, commented, "The Los Filos Gold Mine represents an exceptional opportunity to acquire a quality operation with scale that generates free cash flow and has an identified future growth project. Los Filos has near-term upside potential from optimizing the current operations under a focused management team and from the development of a new underground mine at El Bermejal. Additionally, there are several exploration opportunities within the area of current operations that could extend mine life. Leagold's management team has significant experience successfully acquiring gold mines, increasing productivity, lowering costs and optimizing development projects. We look forward to working with the Los Filos team and the local communities to develop the long-term potential of the mine. We are also pleased to be partnering with Goldcorp with a shared vision of Leagold becoming a leading intermediate gold producer in Latin America with a 'buy & build' strategy that includes the acquisition of additional gold mines and developing advance-stage projects into operating mines."
Frank Giustra, Chairman, commented, "We are thrilled to have Goldcorp as a strategic partner as we launch Leagold with a tremendous asset. We have a highly-experienced management team that is strengthened by a well-connected Board of Directors giving us the mix of skills and relationships needed to achieve our strategic goals."
The Acquisition
Leagold will purchase the Los Filos Gold Mine and related assets for US$350 million, of which US$279 million will be paid in cash and US$71 million in common shares of Leagold. Leagold has also agreed to distribute to Goldcorp the VAT receivable amount in DMSL that is outstanding as of the Acquisition completion date, as and when these amounts are received from the Mexican tax authorities. Leagold will undertake debt and equity financings to fund the Acquisition and related working capital. Leagold has engaged UBS Investment Bank to arrange the debt financing and BMO Capital Markets to arrange the equity financing.
Completion of the Acquisition is expected during Q1 2017 and is subject to standard conditions, including the completion of acquisition financing, receipt of Mexican anti-trust approvals, and the approval of the TSX-V. As this is an arm's length transaction and pursuant to TSX-V Policy 5.2, Leagold is not required to receive approval from its shareholders. Leagold intends to apply for a sponsorship waiver pursuant to TSX-V Policy 2.2.
The price of the common shares of Leagold to be provided to Goldcorp as part of the consideration for the Acquisition will be equal to the price at which Leagold issues shares under its equity financing and Goldcorp has agreed to hold these shares for a minimum of two years, subject to certain exceptions.
Upon completion of the Acquisition, Goldcorp will be entitled to maintain its percentage ownership of the issued and outstanding common shares of Leagold as well as have representation on Leagold's Board of Directors. These entitlements will remain in place so long as Goldcorp's share ownership of Leagold remains at or above 10% of the issued and outstanding common shares of Leagold.
UBS Investment Bank is acting as Leagold's exclusive M&A advisor, and both UBS Investment Bank and BMO Capital Markets have advised on Leagold's transaction financing plan and capital structure.
Leagold's legal counsel is Fasken Martineau DuMoulin LLP.
Qualified Persons
Doug Reddy, P.Geo, Leagold's Senior Vice President – Technical Services, is a Qualified Person under NI 43-101, and has reviewed and approved the technical contents of this news release on behalf of Leagold.
William A. Glover, P.Eng., is a Qualified Person under NI 43-101 and independent of Leagold, and has reviewed and approved the technical contents of this news release on behalf of Stantec Consulting International LLC.
About Leagold Mining Corporation
Leagold aims to build a new mid-tier gold producer with a focus on opportunities in Latin America. Leagold is based in Vancouver, Canada and is listed on the TSX Venture Exchange under the trading symbol "LMC.H".
On behalf of Leagold Mining Corporation
Neil Woodyer, Chief Executive Officer
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