04:38:46 EDT Fri 29 Mar 2024
Enter Symbol
or Name
USA
CA



Gran Colombia Gold Corp (4)
Symbol GCM
Shares Issued 61,098,630
Close 2020-05-08 C$ 6.34
Market Cap C$ 387,365,314
Recent Sedar Documents

Gran Colombia to merge with Gold X, Guyana Goldfields

2020-05-11 06:41 ET - News Release

Also News Release (C-GLDX) Gold X Mining Corp
Also News Release (C-GUY) Guyana Goldfields Inc

Mr. Lombardo Paredes of Gran Colombia reports

GRAN COLOMBIA GOLD PROPOSES TO MERGE WITH GUYANA GOLDFIELDS AND GOLD X TO CREATE A HIGH-GROWTH, LATIN AMERICAN-FOCUSED INTERMEDIATE GOLD PRODUCER

Gran Colombia Gold Corp. has signed a definitive agreement to complete a business combination with Gold X Mining Corp. It has also submitted a proposal to Guyana Goldfields Inc. to acquire all of its issued and outstanding common shares. The contemplated business combination between Gran Colombia and Gold X is conditional upon the successful concurrent acquisition of Guyana Goldfields, and the proposal to Guyana Goldfields is conditional on the concurrent acquisition of Gold X.

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 about 60 per cent of the combined company, with Guyana Goldfields and Gold X shareholders owning about 25 per cent and about 15 per cent, respectively, on a basic shares outstanding basis.

Gran Colombia and Gold X are excited about the opportunity to bring their expertise in Latin American mining projects to maximize the value of the combined assets and create a new Latin American intermediate gold producer. Gran Colombia and Gold X 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 about 5 per cent of the basic shares outstanding.

Transaction highlights:

  • Creates a high-growth, Latin America-focused intermediate gold producer:
    • Strong pro forma 2020 production of 275,000 ounces (1) with production growth to over 500,000 ounces per year, based on management estimates, through the development of three near-term growth projects:
      • Toroparu, Aurora underground and Marmato (via 74-per-cent ownership in Caldas Gold);
    • Poised to become a consolidator in the Latin American gold sector;
  • Unlocks realizable synergies in Guyana:
    • Toroparu is located about 50 kilometres 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 about $200-million (U.S.) 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 general and administrative expenses.
    • A full integration plan will be completed postclosing of the proposal.
  • Enhanced balance sheet and access to capital:
    • The combined company will have greater than $100-million (U.S.) in cash in addition to the financing support provided by Wheaton Precious Metals Corp. to finance development.
    • Caldas Gold is currently evaluating a number of financing options for the Marmato expansion ahead of prefeasibility 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 rerate potential:
    • The transaction is highly accretive to net asset value per share.
    • There is strong potential to rerate 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 Guiana shield;
    • Demonstrated ability to improve and optimize assets.

(1) Based on midpoint of Gran Colombia guidance for Segovia and Marmato (on an attributable basis via 74-per-cent ownership in Caldas Gold) and of Guyana Goldfields May 7, 2020, news release.

Wheaton has indicated their support for Gran Colombia's proposed Guyana consolidation and has indicated it remains committed to helping to finance the development of Toroparu.

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."

Lombardo Paredes, chief executive officer of Gran Colombia, stated: "We have studied the integration of Aurora and Toroparu and strongly believe in its potential. Based on our internal integration plan we have identified $200-million (U.S.) 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."

Paul Matysek, chief executive officer 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 50 km 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."

Transaction details

Under the terms of the proposal, Gran Colombia proposes to acquire all of the issued and outstanding shares of Guyana Goldfields at a share exchange ratio of 0.142 Gran Colombia share for each Guyana Goldfields share, implying a value of 90 cents, a premium of about 29 per cent to the closing price of the Guyana Goldfields shares on the Toronto Stock Exchange on May 8, 2020, and an about 50-per-cent premium to the headline value of the 60 cents per share offered in the contemplated transaction with Silvercorp.

In addition, Gran Colombia can provide Guyana Goldfields with a loan of up to $15-million (U.S.) with a defined use of proceeds related to continuing operations at the Aurora underground project, as well as for certain working capital and general corporate purposes.

Concurrently, Gran Colombia will acquire the remaining 81 per cent of the issued and outstanding shares of Gold X that it does not already own at a share exchange ratio of 0.500 Gran Colombia share for each Gold X share, implying a headline value of $3.17, representing a premium of 15 per cent to the closing price on the TSX Venture Exchange on May 8, 2020, and a premium of 41 per cent to the volume-weighted average price of Gold X shares over the 20 trading days ended on the TSX Venture Exchange on May 8, 2020.

Under the definitive agreement signed May 10, 2020, the Gold X transaction is structured as a plan of arrangement. The proposed Guyana Goldfields transaction is expected to be structured as a plan of arrangement and is subject to the signing of definitive documentation with Guyana Goldfields. The proposal will require approval by a simple majority of the votes cast by Gran Colombia shareholders, and by more than two-thirds of the votes cast by Gold X and Guyana Goldfields shareholders at their respective special meetings of shareholders, as well as the receipt of regulatory approvals including the approvals of the Toronto Stock Exchange and TSX Venture Exchange, and other customary conditions. As the Gold X transaction constitutes a business combination under Multilateral Instrument 61-101, Protection of Minority Security Holders in Special Transactions, majority of minority shareholder approval is also required, being approval by a simple majority of the votes cast at the Gold X special meeting by Gold X shareholders, excluding the votes cast by Gran Colombia.

Gold X board of directors recommendations and support agreements

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 adviser, unanimously approved the Gold X arrangement agreement and recommends that Gold X shareholders vote in favour of the Gold X transaction.

Officers, directors and certain shareholders of Gold X, who collectively hold 5,887,790 or 15.48 per cent of Gold X's issued common shares, have entered into voting support agreements in favour of the Gold X transaction.

Advisers and counsel

Scotiabank is acting as financial adviser to Gran Colombia and Wildeboer Dellelce LLP is acting as Gran Colombia's legal adviser. BMO Capital Markets is acting as financial adviser to Gold X and Stikeman Elliot LLP is acting as Gold X's legal adviser.

About Gran Colombia Gold Corp.

Gran Colombia is a Canadian-based mid-tier gold producer with its primary focus in Colombia where it is currently the largest underground gold and silver producer with several mines in operation at its high-grade Segovia operations.

We seek Safe Harbor.

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