SolidusGold has signed a definitive purchase agreement with Newmont USA and certain of its affiliates (Newmont) to acquire the Northumberland project in Nevada for $20m.
SolidusGold will host a conference call on September 22, 2016, at 8:00 a.m. Pacific Time/11:00 a.m. Eastern Time for members of the investment community to discuss the acquisition. Dial-in details for the conference call can be found at the bottom of this press release.
The Company also announces that it has engaged Haywood Securities Inc. as agent to raise aggregate gross proceeds of up to C$40 million (the "Offering"), which will be used to fund the acquisition of the Northumberland Project, an initial work program on the property and for general working capital purposes. The Company has received indications of support from GF Capital, LLC and certain strategic investors who may subscribe for up to C$20 million worth of subscription receipts as part of the Offering. Certain insiders of the Company have also indicated that they will participate in the Offering.
Acquisition of a large-scale gold asset in a pro-mining jurisdiction with established infrastructure. The historically defined deposit areas are located wholly on patented private land and not subject to any royalty.
Northumberland Project hosts significant known mineralization, including an historic resource estimate completed by Fronteer Gold Inc. (formerly Fronteer Development Group Inc., "Fronteer") (2008), which identified a resource deposit. Substantial drilling completed subsequent to this historical resource estimate has not yet been incorporated into an updated block model, and the mineralized area remains open to potential expansion.
SolidusGold plans to initiate a two-pronged strategy: expanding and advancing the near-surface oxide gold mineralization amenable to heap leaching; plus exploration of deeper sulfide gold mineralization. Significant metallurgical work has been completed subsequent to the historical resource estimate.
The transaction represents the creation of a new junior gold company, holding one of only a few remaining large-scale gold exploration assets in North America, and leverages the Company's significant experience in resource exploration and development.
Rick Van Nieuwenhuyse, Chairman and Interim CEO of SolidusGold, commented: "We are very pleased to have come to an agreement with Newmont to acquire the renowned Northumberland Project containing over 3 million ounces of historical gold resource. Subsequent to the historical resource estimate, approximately US$17.5 million has been spent advancing the Project. Based on our evaluation, our team sees excellent potential for further expansion. Due to continuous M&A activity, the availability of large-scale gold exploration assets in mining-friendly jurisdictions has become a rarity. SolidusGold looks forward to putting our team's expertise to work in Nevada."
The Northumberland Project
The Northumberland Project is a gold project located near the geographic center of Nevada in northern Nye County, approximately 250 miles southeast of Reno and 30 miles north of Kinross's Round Mountain Mine. The project area is comprised of approximately 24,000 acres (8,900ha) of unpatented lode claims and 3,885 acres (1,572ha) of patented (private) mining claims, mill site patents, and fee lands. Historic open-pit heap-leach mining activities were undertaken at the Northumberland Project from 1981 through 1990, with a historic production of approximately 231,000 oz Au and 486,000 oz Ag.
The Northumberland Project has a historical resource estimate as reported in the document titled 'Technical Report on the Northumberland Project, Nye County, Nevada, USA: Resources Update 2008, Amended August 8, 2008' prepared by Fronteer (the "Northumberland Report") with an effective date of August 8, 2008. All of the historical resources outlined in the Northumberland Report lie within the patented (private) land claims.
The historic resource estimate does not include any subsequent drilling done by Fronteer and Newmont between 2008 and 2016. However, the Company understands that approximately ~18,600 meters were drilled and approximately US$17.5 million was expended over that period of time.
Details of the gold and silver historical resource estimate can be found in the Northumberland Report which is available on SEDAR. This resource is an historical estimate and a qualified person has not done sufficient work to classify the historical estimate as current mineral resources or mineral reserves. As a result the historical estimate is not being treated as a current mineral resource.
Under the terms of the Agreement, dated September 15, 2016, the Company will pay to Newmont a total of US$20 million upon closing. In addition to the purchase price, the Company has also agreed to replace Newmont's existing surety arrangements with the United States Forest Service and other state and federal governmental authorities. Newmont will retain a preferential right of first offer to process sulfide materials mined from the Northumberland Project in certain circumstances. The transaction is subject to customary closing conditions, including TSX Venture Exchange approval. The transaction is expected to close on or before November 30, 2016. The transaction is at arm-length.
The Company has concurrently entered into an agreement with Haywood Securities Inc. (the "Agent") whereby the Agent has agreed to offer for sale, on a commercially reasonable efforts agency basis, up to 114,285,800 subscription receipts at a price of C$0.35 per subscription receipt (the "Issue Price") for aggregate gross proceeds of up to C$40 million. In addition, the Company has granted the Agent an over-allotment option exercisable at any time up to two business days prior to the closing of the issuance of the subscription receipts to sell up to an additional 17,142,870 subscription receipts at the Issue Price which, if exercised in full, would result in additional gross proceeds to the Company of C$6 million. Each subscription receipt will, subject to completion of certain escrow release conditions, including the satisfaction or waiver of conditions precedent to the closing of the purchase of the Northumberland Project, be deemed to be converted into one common share in the capital of the Company for no additional consideration immediately prior to the closing of the purchase of the Northumberland Project by the Company. The closing of the issuance of the subscription receipts is expected to occur on October 20, 2016.
The Company has received indications of support from GF Capital, LLC and certain strategic investors who may subscribe for up to C$20 million worth of subscription receipts as part of the Offering.
Certain insiders of the Company have also indicated that they will participate in the Offering. Such participation would be considered to be a "related party transaction" as defined under Multilateral Instrument 61-101 ("MI 61-101"). The transaction will be exempt from the formal valuation and minority shareholder approval requirements under MI 61-101.
The net proceeds of the Offering will be used to fund the acquisition of the Northumberland Project, an initial work program on the property and for general working capital purposes.
The Company has agreed to pay a cash commission of 5% of the gross proceeds under the Offering and to issue such number of compensation subscription receipts as is equal to 2% of the subscription receipts issued to subscribers pursuant to the Offering, excluding president's list subscriptions. Upon the satisfaction of the escrow release conditions, each compensation subscription receipt will be automatically exchanged for one compensation option to acquire one common share at the Issue Price for 12 months.
The Offering is subject to customary conditions including approval of the TSX Venture Exchange. The subscription receipts and the common shares issued upon conversion of the subscription receipts will be subject to a hold period expiring four months and one day from the date of issuance.