Mr. Peter Ball reports
SILVER HAMMER REACHES DEFINITIVE AGREEMENT TO ACQUIRE THE PERMITTED SHAFTER SILVER MINE PROJECT AND ANNOUNCES PROPOSED REORGANIZATION
Silver Hammer Mining Corp. has entered into a definitive share purchase agreement dated Sept. 27, 2023, to acquire a 100-per-cent interest in the Shafter silver deposit, a previously producing high-grade silver mine located in Presidio county in southwest Texas, from Aurcana Silver Corp. The consideration to be paid by Silver Hammer for the Shafter project includes cash of $800,000 (U.S.) (less certain exclusivity fees and prepaid expenses), 23 million shares, certain contingent payments (detailed herein), and, for the settlement of existing debt, the issuance of $4-million in secured convertible debentures and eight million units (each comprising a common share and one-half warrant at 33 cents for two years).
Highlights of the Shafter project and transaction:
- All material operational permits remain in place at the past-producing high-grade silver mine, which is located in western Texas, United States;
- Past producer most recently in production from 2012 to 2013 when operated by Aurcana; approximately $50-million (U.S.) was spent historically by Aurcana; in addition, Aurcana purchased the Shafter project in 2008 for $25-million (U.S.); an estimated $160-million (U.S.) has been invested in the property since the discovery of the deposit in the late 1800s;
- Updated National Instrument 43-101 mineral resource technical report with an effective date of Sept. 15, 2023, including measured and indicated resources of 10.8 million ounces of silver in 1,152,000 tons grading 9.38 ounces per ton silver and inferred resources of 6.3 million ounces of silver in 823,000 tons grading 7.67 ounces per ton silver;
- The silver deposit at the Shafter project is classified as a carbonate replacement deposit (CRD) and the geology at the project is similar to some the world's largest CRDs, located just to the southwest in northern Mexico, including the Santa Eulalia mine and the Cinco de Mayo project; additional exploration upside was identified at regional priority targets from previous stepout drill holes to the southwest, which identified silver and gold mineralization;
- There are opportunities to expand the current mineral resource within the project boundaries as the project has not been systematically explored and the source of the Shafter CRD has never been identified;
- Benefits from extensive site infrastructure, including full access through portal/decline and extensive underground workings, ventilation and access shaft/hoist, and full processing plant, including a 3,000-ton-per-day ball mill;
- Project controls existing water rights, with an available local labour force, power grid located at site, a low royalty burden, and strong community relations and support;
- Team of seasoned mining, metallurgical and exploration executives assembled to assist Silver Hammer as advisers and internal consultants.
"The acquisition of the high-grade silver Shafter complex and permitted mine is a transformational point in Silver Hammer's transition and goal to become North America's next silver producer. Shafter contains an established mineral resource of approximately 10.8 million ounces of silver in the measured and indicated category and an additional inferred silver resource of approximately 6.3 million ounces. To ensure the project is advanced towards the development and production stages, Silver Hammer has attracted key senior-level technical geological and mining advisers, including previous VP [vice-president], exploration, and VP/COO [chief operating officer] mining experts that held executive roles with Hudbay Minerals, Coeur Mining, Silver Standard, Centerra, Mag Silver, Probe Mines, Hecla and Royal Oak Mines," commented Peter A. Ball, president and chief executive officer of Silver Hammer Mining. "In addition to containing a significant silver resource, the Shafter project is located in a politically safe jurisdiction in Texas, United States; is located adjacent to a paved highway with significant infrastructure, including power grid through the middle of the project, full control of water rights, a local work force and supportive community."
Appointment of new board member
The company has appointed Donald J. Birak as a newly appointed director of Silver Hammer, replacing Joness Lang, who has stepped down from the director role but will remain as a strategic adviser to assist the company in continuing corporate development initiatives. The company appreciates Mr. Lang's significant contribution to the company since its inception and agreeing to remain with the company as a strategic adviser during this exciting phase of growth for the company.
Mr. Birak joined the company as a senior technical adviser earlier in 2023 and brings more than 45 years of experience in mineral exploration and operations, including the roles of senior vice-president of exploration with Coeur Mining (2004 to 2013) responsible for global greenfield and brownfield exploration; vice-president of exploration for AngloGold North America (1998 to 2004), Independence Mining Company (1995 to 1998), and Hudson Bay Mining & Smelting Ltd. (1992 to 1995); and chief geologist and exploration geologist for Freeport-McMoRan Gold Company (1978 to 1991). Mr. Birak brings a wealth of knowledge and expertise to the Silver Hammer team and specifically to the advancement of the Shafter silver project.
Newly formed executive technical team and strategic adviser
Silver Hammer has recently assembled a highly experience technical team to complete due diligence to fully evaluate and to assist in advancing the Shafter project through an accelerated strategy to complete a mineral resource expansion and initiate mine development toward future production by 2027. The team is made up of the following seasoned executives:
- Lawrence Roulston, director -- more than 40 years in project evaluation and experience mining executive; currently president and chief executive officer of MTB Metals Corp. and chairman of Metalla Royalties;
- Ron Burk, director -- more than 40 years in senior-level precious metals exploration roles, including vice-president, exploration, for Silver Standard and Centerra; Silver Standard previously owned the Shafter deposit until 2008;
- Donald Birak, newly appointed director -- more than 45 years in senior-level precious metal exploration roles, including senior vice-president, exploration, for Coeur Mining, and vice-president, exploration, for AngloGold North America and Hudson Bay Mining Smelting;
- Dr. Peter Megaw, geological adviser -- more than 45 years in senior-level precious metal exploration roles and recognized carbonate replacement deposit (CRD) systems; a co-founder of Mag Silver; Dr. Megaw's PhD work focused on the Santa Eulalia silver-lead-zinc district in Mexico, and he is credited with numerous discoveries in Mexico, including Platosa (Excellon), Juanicipio-Fresnillo (Fresnillo/Mag Silver) and Pozo-Seco/Cinco de Mayo (Mag Silver);
- Damir Cukor, geological adviser -- more than 35 years in resource development, project management, resource modelling and advisory roles;
- Michael Willett, mining adviser -- seasoned mining executive with more than 35 years in mine engineering, development and operations, including senior-level project evaluation and advisory roles for project restarts with various mining companies across North America; most recently, Mr. Willett held the position of vice-president of operations and projects for Battle North Gold and was part of the team that successfully sold the company to Evolution Mining for $343-million in 2021;
- Adrian McNutt, mining and metallurgical adviser -- experienced mining executive and metallurgical consultant with more than 35 years in the evaluation and precious metal operations across the Americas, including executive positions as chief operating officer of Royal Oak Mines and Century Mining;
- Mike Petrina, PEng, mining adviser -- more than 35 years in the mining sector, including senior-level executive roles of vice-president, mining, of Mag Silver; vice-president, operations, of Probe Mining; vice-president, mining, of Hawthorne Gold; and multiple mine engineering advisory roles;
- Mike Gross, mining adviser -- more than 45 years with experience as a mine operator, operations executive and exploration executive in the Americas, including vice-president, mining, for Hecla Mining.
The company has engaged Echelon Capital Markets as its financial adviser with respect to the transaction.
The Shafter project
The Shafter silver mine has all material permits in place with extensive surface infrastructure and underground workings, including portal/decline and shaft access and a processing facility rated at approximately 1,500 tons per day. The project is located in West Texas and is fully accessible by paved highway from El Paso, Tex. Shafter has estimated measured and indicated resources of 10,803,000 ounces of silver and an inferred resource of 6,315,000 ounces of silver, as summarized in the attached table. This estimate has been prepared for Silver Hammer Mining by Respec and is dated effective Sept. 15, 2023, and an NI 43-101 technical report will be filed on SEDAR+ within 45 days of the date hereof.
- The Shafter district was first discovered in 1880 or 1881, and the Presidio Mining Company was formed in 1881. Silver was produced from the Presidio mine from 1883 to 1926, when the American Metal Co. acquired the Shafter property and continued production (American Metal Co. subsequently merged with Climax Molybdenum Company to form American Metal Climax, Inc. ("AMAX").
- From 1883 to 1942, when the Presidio mine was closed, total recorded production was 2.307 million tons of ore containing 35.153 million ounces of silver at an average grade of 15.24oz Ag/ton.
- AMAX, Gold Fields Mining Corporation ("Gold Fields"), and Rio Grande Mining Company ("RGMC") successively held the Shafter property and conducted extensive exploration programs from 1926 to 1999. Gold Fields identified the northeastern, down-dip extension of the Shafter deposit, extending more than 5,000ft from the deepest development workings in the Presidio mine, through a systematic surface-drilling program. During the 1970s, Gold Fields constructed a 1,052ft deep shaft to access and explore the northeastern extension.
- Aurcana purchased RGMC and the Shafter property in July 2008 for US$25 million. RGMC is now a wholly owned subsidiary of Aurcana. Aurcana began exploration at Shafter in 2011 and has conducted geophysical surveying, drilling, mapping, and geochemical sampling since that time. Aurcana drilled 65 surface and 101 underground holes from 2011 through October 2013.
- A total of 1,694 drill holes are included in the resource database for the Shafter Project, of which 1,048 were drilled by AMAX, 403 were drilled by Gold Fields, 88 were drilled by RGMC prior to their acquisition by Aurcana, and 155 holes were drilled by RGMC since their acquisition by Aurcana.
- These holes include 435 surface core holes, 1,171 underground core holes, and 88 reverse circulation holes. An additional eleven underground core holes were drilled by Aurcana in late 2013 after the database was finalized for use, but before the current resource estimate was completed. Aurcana also drilled five exploration holes in 2017 outside of the current resource area. These 2013 and 2017 holes do not impact the current resource estimate and are not included within the current drill database.
- Aurcana reopened access into the Presidio mine on June 1, 2012, and production commenced on December 14, 2012, after spending approximately US$50 million including a portal/decline access, mill, and operations modifications. In conjunction with its underground operations, Aurcana began open-pit mining of lower-grade mineralization from the Mina Grande pit at the Presidio mine on April 23, 2012.
- Mining was discontinued after the plant commissioning and testing phase were complete, due mostly in part to lower silver prices reaching close to US$17/oz and rushed production start-up issues. The mine was put on care and maintenance in December 2013.
- An estimated US$160 million has been invested in the property since the discovery of the deposit in the late 1800's.
- Significant opportunity exists regionally noting the geological setting of the Shafter Silver Deposit is on the eastern margin of the Chihuahua Trough, which is host to several world-class CRD (Carbonate Replacement Deposits) including the Santa Eulalia Mine (Grupo Mexico), Cinco de Mayo project (MAG Silver), and the Plomosas Property, a polymetallic deposit (GR Silver Mining).
In connection with the Purchase Agreement, the company will first complete a reorganization (the "Reorganization") whereby all of the company's outstanding shares will be acquired by a newly incorporated company, Silver Hammer Metals Corp. ("Newco"), and shareholders of the company will receive common shares of Newco ("Newco shares") in exchange for their Company shares. Newco will then acquire all of the outstanding shares in the capital of Rio Grande Mining Corporation ("Rio Grande"), a subsidiary of Aurcana that owns the assets, property, rights and undertakings of and relating to the Shafter Project (the "Shafter Acquisition"). The Reorganization is expected to be implemented by way of a court-approved plan of arrangement under the Business Corporations Act (British Columbia) (the "Plan of Arrangement"), which will result in the company becoming a wholly-owned subsidiary of Newco. Under the Plan of Arrangement, each common share of the company will be exchanged for one Newco share and the convertible securities of the company will become exercisable for securities of Newco on an equivalent basis. The Reorganization is subject to approval of the Supreme Court of British Columbia and the shareholders of Silver Hammer.
On closing of the Transaction, in consideration for the shares of Rio Grande, Aurcana will receive a cash payment of US$800,000 (less certain exclusivity fees and prepaid expenses) and 23,000,000 Newco shares at a deemed price of $0.25 per Newco share. In addition, upon the completion of the next equity financing completed by Newco following the closing, Aurcana will receive an additional cash payment of US$375,000. Aurcana may also receive additional post-closing payments, payable in cash or shares, subject to the achievement of certain milestones within 48 months of closing of the Shafter Acquisition in the aggregate amount of up to US$3,000,0000, as follows: (a) up to US$1,000,000 will be payable in connection with the first public announcement of a new mineral resource estimate on the Shafter Project which includes measured and indicated mineral resources of at least 18 million ounces, (b) US$1,000,000 will be payable upon the Shafter Project entering commercial production, (c) US$500,000 will be payable if the spot price of silver is equal to or greater than US$30 per ounce for a period of 60 consecutive days, and (d) an additional US$500,000 will be payable if both (b) and (c), above, are met.
Newco has also entered into an agreement with noteholders of Rio Grande to settle certain outstanding debt of Rio Grande in connection with the Shafter Acquisition (the "Debt Settlement"). Pursuant to the Debt Settlement, Newco will acquire all of the outstanding notes of Rio Grande in the aggregate principal amount of $6,517,662 (the "Rio Grande Notes") in consideration for (a) an aggregate of 4,000 debenture units of Newco, each consisting of one $1,000 principal amount secured convertible debenture of Newco, representing $4,000,000 in total (the "Debentures"), and 2,000 common share purchase warrants of Newco (the "Warrants"), (b) an aggregate of 8,000,000 units of Newco, each consisting of one Newco share and one-half of a Warrant, and (c) additional securities of Newco on the same terms as the Concurrent Financing (as described below) in settlement of all interest accrued on the Rio Grande Notes from August 31, 2023 to closing. The Debentures will be convertible into Newco shares at the conversion price of $0.25 per Newco share and each Warrant will entitle the holder thereof to purchase one Newco share at the exercise price of $0.33 per Newco share for a period of 24 months from closing.
On closing of the Transaction, Newco and Aurcana will enter into an investor rights agreement (the "Investor Rights Agreement") pursuant to which Newco and Aurcana will agree to certain investor rights and restrictions relating to the Newco shares to be issued to Aurcana pursuant to the Shafter Acquisition. Under the Investor Rights Agreement, Aurcana will have the right to nominate one member of the Board of Directors of Newco, increasing to two directors if at any time Aurcana holds greater than 35% of the outstanding Newco shares. Aurcana will agree to certain standstill restrictions and to vote its Newco shares in accordance with recommendations of management and for a period of 24 months. In addition, the Newco shares issued to Aurcana will be subject to voluntary resale restrictions with 25% of the Newco shares being locked-up for 4 months from closing, 25% of the Newco shares being locked-up for 8 months and the remaining 50% of the Newco shares being locked up for a period of 12 months.
In connection with the Shafter Acquisition and pursuant to the terms of the Purchase Agreement, Silver Hammer will arrange a concurrent equity financing for minimum gross proceeds of CAN$3,000,000 (the "Concurrent Financing"). The terms of the Concurrent Financing will be disclosed in a subsequent news release once finalized.
Completion of the Shafter Acquisition is subject to a number of conditions, including: (i) the receipt of all required approvals of the shareholders of Aurcana and the company; (ii) the receipt of all necessary regulatory and third party consents, approvals and authorizations, including all necessary stock exchange approvals; (iii) the Completion of the Concurrent Financing for minimum gross proceeds of CAN$3,000,000, (iv) the completion of the Reorganization and the Debt Settlement, (v) conditional approval of the CSE for the listing of the Newco shares, including the Newco shares to be issued in connection with the Shafter Acquisition, the Reorganization and the Debt Settlement, and (vi) other standard closing conditions for a transaction of this nature. The Transaction is an arm's length transaction. Upon completion of the Transaction, the Reorganization and the Debt Settlement, Silver Hammer shareholders are expected to own approximately 63% of the Newco shares on a non-diluted basis (excluding securities to be issued pursuant to the Concurrent Financing).
Trading of the company's common Shares has been halted as a result of the announcement of the proposed Transaction and the company expects that trading will remain halted pending closing of the Transaction, subject to earlier resumption upon CSE acceptance of the proposed Transaction and the filing of required materials in accordance with the policies of the CSE, if and as applicable.
Additional information concerning the proposed Shafter Acquisition, the Reorganization, the Debt Settlement, the Shafter Project, and Newco will be provided in the management proxy circular of the company to be prepared and delivered to shareholders of Silver Hammer, which will be available in due course under the company's SEDAR+ profile.
All scientific and technical information in this press release has been prepared or reviewed and approved by Damir Cukor, P. Geo, an independent geological consultant of the company, Linda Dufour, P.Eng, an independent metallurgical consultant of the company, and Michael S. Lindholm, CPG of RESPEC. Each of Mr. Cukor, Ms. Dufour, and Mr. Lindholm are "qualified persons" for the purposes of NI 43-101. Mr. Cukor is the Qualified Person for all technical information in this news release, excluding the Updated Mineral Resource Estimate.
About Silver Hammer Mining Corp.
Silver Hammer Mining Corp. is a junior resource company focused on advancing past-producing high-grade silver projects in the United States. Silver Hammer controls 100% of the Silver Strand Mine in the Coeur d'Alene Mining District in Idaho, USA, as well both the Eliza Silver Project and the Silverton Silver Mine in Nevada and the Lacy Gold Project in British Columbia, Canada. Silver Hammer's primary focus is defining and developing silver deposits near past-producing mines that have not been adequately tested. The company's portfolio also provides exposure to copper and gold discoveries.
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