Toronto, Canada based Gran Colombia Gold Corp. (TSX: GCM; OTCQX: TPRFF) announced today that it has signed a definitive agreement to complete a business combination with Gold X Mining Corp. (TSXV: GLDX, OTCQX: SSPXF) and that it has submitted a proposal to Guyana Goldfields Inc. (TSX:GUY) to acquire all of its issued and outstanding common shares. The three way merger is contingent upon the successful concurrent acquisition of Guyana Goldfields, and the proposal to Guyana Goldfields is conditional on the concurrent acquisition of Gold X.
Serafino Iacono, Executive Chairman of Gran Colombia, stated: “We are excited to present this opportunity to all the shareholders of Gran Colombia, Guyana Goldfields and Gold X. It is extremely rare to come across a transaction that can unlock significant tangible synergies outside of simply consolidating head offices. Not only does this transaction unlock meaningful value for all shareholders, but it creates a new Latin American gold champion with Latin American operators and mine builders. We will use our unique skill set to continue to grow Gran Colombia and create substantial value for all shareholders. We look forward in the coming weeks to present our vision to shareholders and demonstrate the superior value that our proposed merger possesses.”
The combined entity will continue as Gran Colombia and will be managed by the current Gran Colombia executive team, with corporate headquarters remaining in Toronto. Shareholders of Gran Colombia will own approximately 60% of the combined company, with Guyana Goldfields and Gold X shareholders owning approximately 25% and 15%, respectively, on a basic shares outstanding basis.
“We have studied the integration of Aurora and Toroparu and strongly believe in its potential. Based on our internal integration plan we have identified US$200 million of synergies as there are a number of different areas where Toroparu can benefit from the existing infrastructure at Aurora. This is truly a unique opportunity and I look forward to using Gran Colombia’s strong operating and mine-building team to unlock this substantial value for shareholders,” said Lombardo Paredes, CEO of Gran Colombia.
Gran Colombia and Gold X say that they believe the immediate value creation afforded to Guyana Goldfields shareholders via the upfront offer premium and the ability to realize further value through the continued operations in the new larger, stronger entity represents an opportunity far superior, both strategically and financially, to the proposed transaction between Silvercorp Metals Inc. and Guyana Goldfields announced on April 27, 2020.
In support of the Proposal, Gran Colombia has purchased 8.7 million shares of Guyana Goldfields, representing approximately 5% of the basic shares outstanding.
The Gold X Arrangement Agreement has been negotiated under supervision of, and reviewed and recommended for acceptance by, a special committee of Gold X directors independent of Gran Colombia. The Board of Directors of Gold X, relying in part on the recommendation of its special committee and a fairness opinion from its financial advisor, unanimously approved the Gold X Arrangement Agreement and recommends that Gold X shareholders vote in favor of the Gold X Transaction.
Officers, directors and certain shareholders of Gold X, who collectively hold 5,887,790 or 15.48% of Gold X’s issued common shares, have entered into voting support agreements in favour of the Gold X Transaction.
Paul Matysek, CEO and Chairman of the Board of Directors of Gold X, added: “We envision that this business combination will release both short and long term value through the economies of scale and synergies inherent in two large deposits located within 50km of each other. We are fortunate to have attracted such an experienced operator as Gran Colombia Gold. The management team’s success as an underground miner in Colombia as well as history developing assets within the Guiana Shield make them the ideal partner for development of the mining assets in Guyana. This deal just makes a lot of business sense on all fronts!”
Advisors and Counsel
Scotiabank is acting as financial advisor to Gran Colombia and Wildeboer Dellelce LLP is acting as Gran Colombia’s legal advisor.
BMO Capital Markets is acting as financial advisor to Gold X and Stikeman Elliot LLP is acting as Gold X’s legal advisor.
Creates a High-Growth, Latin American-Focused Intermediate Gold Producer
- Strong pro-forma 2020 production of 275,000 oz with production growth to over 500,000 oz/year, based on management estimates, through the development of three near-term growth projects:
- Toroparu, Aurora Underground and Marmato (via 74% ownership in Caldas Gold)
- Poised to become a consolidator in the Latin American gold sector
- Based on midpoint of Gran Colombia guidance for Segovia and Marmato (on an attributable basis via 74% ownership in Caldas Gold) and of Guyana Goldfields May 7, 2020 news release
- Unlocks Realizable Synergies in Guyana
- Toroparu is located ~50km from Aurora and Gran Colombia and Gold X have identified an opportunity to connect the two sites and use existing Aurora infrastructure to develop an optimized production plan for both Toroparu and Aurora gold resources that significantly reduces the upfront capital that would be required to start the Toroparu Open Pit and Aurora Underground projects independently
- Management estimates potential to unlock savings of ~US$200 million based on latest Toroparu and Aurora technical reports
- Key savings include use of the Toroparu resource as satellite deposits for near-term gold production from Aurora’s leach processing facility, use of existing mining fleet and camp facilities at Aurora, shared access infrastructure, and consolidated G&A
- Full integration plan to be completed post-closing of the Proposal
- Enhanced Balance Sheet and Access to Capital
- Combined company will have greater than US$100 million in cash in addition to the financing support provided by Wheaton Precious Metals Corp. to fund development. Wheaton has indicated their support for Gran Colombia’s proposed Guyana consolidation and has indicated it remains committed to helping to fund the development of Toroparu.
- Caldas Gold is currently evaluating a number of financing options for the Marmato expansion ahead of pre-feasibility study due mid-2020
- The combined company will also have greater access to equity and debt markets and benefit from Gran Colombia’s Segovia Project’s robust free cash flow
- Highly Accretive Transaction with Strong Re-Rate Potential
- The transaction is highly accretive to net asset value per share
- Strong potential to re-rate as Gran Colombia enters a new larger peer set due to the resulting benefits of enhanced production, free cash flow and liquidity along with potential increased index inclusion
- Proven Latin American Operating and Mine Building Experience
- Proven experience operating in Latin America through operating the largest underground gold and silver producer in Colombia
- Highly qualified executive team with prior mine building experience in the 1.7 billion year old Guiana Shield
- Demonstrated ability to improve and optimize assets