Mr. Charles Funk of Heliostar reports
HELIOSTAR TO ACQUIRE A 1.4M OUNCE, PERMITTED GOLD DEPOSIT AND OPTION ANOTHER 1.7M OUNCE GOLD DEPOSIT IN MEXICO
Heliostar Metals Ltd. entered into a binding share purchase agreement dated Dec. 5, 2022, with Argonaut Gold Inc. for the sale of all of the issued and outstanding shares of Aurea Mining Inc., a wholly owned subsidiary of Argonaut, which through Aurea Mining's wholly owned subsidiary, Minera Aurea SA de CV, holds a 100-per-cent indirect interest in and to the Ana Paula gold project, and has also entered into a binding option agreement with Argonaut and its wholly owned subsidiary, Compania Minera Pitalla SA de CV, pursuant to which it has been granted an option to acquire a 100-per-cent interest in the San Antonio gold project. Both projects are located in Mexico.
- Heliostar has entered into definitive agreements with Argonaut Gold to acquire the Ana Paula gold project and option the San Antonio gold project in Mexico.
- Ana Paula is permitted for an open-pit mine with measured and indicated (M&I) mineral resources of 1.46 million ounces gold at 2.17 grams per tonne gold and 3.27 million ounces silver at 4.8 grams per tonne silver.
- San Antonio is a high-grade oxide resource containing M&I mineral resources of 1.73 million ounces of gold grading 0.83 gram per tonne gold.
- The purchase price for Ana Paula is $10-million (U.S.) cash. Subsequent milestone payments comprise $10-million (U.S.) cash payments and $10-million (U.S.) of cash or share payments.
Heliostar chief executive officer Charles Funk commented: "The acquisition of this portfolio transforms Heliostar into a mine development company. This is a significant milestone towards our ultimate transformation into a high-margin gold mining company.
"Upon closing the transactions, our asset base of Ana Paula, San Antonio and Unga will contain 3.2 million ounces of gold in the M&I categories and 500,000 ounces of gold in the inferred category. Heliostar now provides multiple unique levers, with two advanced development projects in Ana Paula and San Antonio and the Unga project, which we continue to believe to be a project with significant high-grade resource upside. We believe these acquisitions will allow Heliostar to provide outsized returns for shareholders, including project derisking, mine development, permitting, resource growth and discovery.
"The company considers Ana Paula to be significantly more capital efficient as a potential underground mine with a simple mill flow sheet focusing on the high-grade core within the deposit. The company intends to immediately commence rescoping the project to ahead of proceeding to a feasibility study."
Ana Paula gold project:
- Proven and probable mineral reserves of 1,021,000 ounces of gold at 2.36 grams per tonne gold and 2,254,000 ounces of silver at 5.22 grams per tonne silver;
- High-grade gold project with potential to be an open-pit or underground mine;
- Permitted for an open-pit mine;
- Estimated $75-million (U.S.) of historic exploration and development expenses;
- Existing mine infrastructure including a 412-metre-long decline in place;
- 142,000 metres of drilling in 333 holes.
San Antonio project:
- Measured and indicated mineral resources of 1,735,000 ounces of gold at 0.83 gram per tonne gold;
- High-grade oxide gold project;
- Located in a historic mining district on the Baja California peninsula;
- 102,000 metres of drilling in 589 holes.
The current market conditions have created the opportunity for Heliostar to acquire advanced and meaningful new projects. Ana Paula and San Antonio are outstanding projects that the company believes will create value for its shareholders. Each project offers a development pathway and advanced exploration targets that could unlock value for the shareholders into the future.
Ana Paula gold project
The Ana Paula gold project is an advanced-stage gold development project located in Guerrero state, Mexico. Guerrero state hosts several producing mines in the region. The project holds a current permit to build and operate an open-pit mine on the site.
A 2017 preliminary feasibility study of Ana Paula reported proven and probable mineral reserves of 13.44 million tonnes at 2.36 grams per tonne gold and 5.22 grams per tonne silver for 1,021,000 ounces of gold and 2,254,000 ounces of silver based on an open-pit mining scenario.
M&I mineral resources considered amenable to open-pit and underground mining include 1,461,800 ounces gold (20,998,000 tonnes at 2.17 grams per tonne gold) and 3,269,000 ounces silver (20,998,000 tonnes at 4.8 grams per tonne silver).
Economics from the 2017 technical report value the project net present value (discounted at 5 per cent) at $233-million with an internal rate of return of 34 per cent after tax based on a gold price of $1,250. The plan calculated a gold recovery of 85 per cent and resulted in a 7.5-year mine life producing 868,000 ounces of gold.
The open-pit minable mineralization is greater than two grams per tonne gold. It contains a well-defined tabular body of higher-grade mineralization extending from surface. An extensive and open halo of lower-grade gold mineralization surrounds the high-grade body. This geometry and disposition are amenable to both open-pit and underground mining methods.
Focusing on the higher-grade, greater-than-five-gram-per-tonne-gold zones within the resource, the company is considering an underground-only mining scenario. This scenario is considered likely to be centred on the high-grade core that has approximate dimensions of 250 metres long, 100 metres high and 60 metres wide. This core has the potential to drive a high-margin, underground gold mine and will be the immediate focus for the company.
Heliostar plans to immediately commence a rescoping study. The new scoping study will determine the optimal balance between open-pit and underground mining methods. In addition, it will add additional metallurgical studies required to finalize an optimal flow sheet. The focus will be on reducing both capital cost and operational risk by simplifying both processing and mining methods of the project.
A definitive feasibility study will be completed based on the results of the rescoping project.
San Antonio gold project
The San Antonio gold project is an advanced-stage gold development project located in Baja California Sur state, Mexico. Development is currently paused due to a pending environmental permit. Heliostar will earn the option to acquire a 100-per-cent interest in the project by obtaining this permit.
A 2012 preliminary economic assessment reported a measured and indicated mineral resources of 65,089,000 tonnes at 0.83 gram per tonne gold for 1,735,000 ounces of gold and an inferred resource of 6,215,000 tonnes at 0.34 gram per tonne gold for 67,000 ounces of gold. The project net present value (discounted at 8 per cent) from 2012 is $293-million on a pretax basis, based on a gold price of $1,500 per ounce. Based on the existing mine plan, the mine's capex (capital expenditure) payback period is less than 1.5 years of the 15-year mine life.
Drilling at the project includes 589 holes totalling 102,000 metres. Additionally, mineral concessions cover 46,327 hectares and extend over the along-strike and lateral projections of significant structural corridors.
The preliminary economic assessment outlines the San Antonio gold project as a medium-scale, open-pit mine with an approximate 3:1 strip ratio. Processing is proposed to be by conventional heap leach of crushed ore.
Ana Paula purchase agreement
Under the terms of the purchase agreement, Heliostar has agreed to acquire all the issued and outstanding shares of Aurea Mining, which, through its wholly owned subsidiary Minera Aurea, indirectly holds the title and permit to mine the Ana Paula gold project, in consideration for:
- A cash payment to Argonaut $10-million (U.S.) at closing;
- On the earlier of receiving an extension to the existing Ana Paula open-pit mining permit and the granting of a new underground mining permit, the issuance of such number of common shares in the capital of Heliostar as having an aggregate value of $5-million (U.S.) to Argonaut divided by the volume-weighted average closing price (VWAP) of the Heliostar shares for the 10 trading days ending on the last trading day immediately prior to the date of the purchase agreement;
- On the earlier of (a) the date of completion of a feasibility study for the Ana Paula gold project and (b) July 1, 2024, a cash payment to Argonaut of $2-million (U.S.);
- On the date that Heliostar announces a construction decision for the Ana Paula gold project, it will pay to Argonaut an additional cash payment of $3-million (U.S.) and $2-million (U.S.) in cash or Heliostar shares at a deemed price equal to the VWAP of the Heliostar shares for the 10 trading days immediately prior to announcement of the construction decision;
- On the date that Heliostar commences commercial production at the Ana Paula gold project, it will pay to Argonaut an additional $5-million (U.S.) in cash and $3-million (U.S.) in cash or Heliostar shares at a deemed price equal to the VWAP of the Heliostar shares for the 10 trading days immediately prior to announcement of the commercial production.
San Antonio option agreement
Heliostar also entered into the option agreement with Argonaut and Compania Minera Pitalla, which holds the title to the San Antonio gold project. Under the terms of the option agreement, Heliostar has the option to earn a 100-per-cent interest in and to the San Antonio gold project as follows:
- Three-year option to successfully acquire an environmental permit (MIA) from Secretaria del Medio Ambiente y Recursos Naturales (SEMARNAT) to advance the project;
- If Heliostar is able to obtain the permit for San Antonio, then Heliostar has a further 18-month option to acquire a 100-per-cent interest based on the following gold prices:
- Paying $80-million (U.S.) (up to 50 per cent in shares) if the average gold price is below $1,800 (U.S.) for the six months preceding Heliostar exercising the option;
- Or paying $120-million (U.S.) (up to 50 per cent in shares) if the average gold price is above $1,800 (U.S.) but below $2,000 (U.S.) for the six months preceding Heliostar exercising the option;
- Or paying $150-million (U.S.) (up to 50 per cent in shares) if the average gold price is above $2,000 (U.S.) for the six months preceding Heliostar exercising the option;
- Granting of a 2-per-cent net smelter return (NSR) royalty (capped at 2 per cent for claims with existing NSR royalty considerations).
The grant of the option to Heliostar pursuant to the option agreement is subject to concurrent completion of the transactions under the purchase agreement.
Transaction financing details will be included in a subsequent release.
Closing of the proposed transactions and any project-level or equity financing will be subject to regulatory approval, including that of the TSX Venture Exchange, as well as satisfaction of various closing conditions customary of transactions of this nature.
Statement of qualified person
The company's disclosure of technical or scientific information in this press release has been reviewed and approved by Stewart Harris, PGeo, exploration manager for the company. Mr. Harris is a qualified person as defined under the terms of National Instrument 43-101.
About Heliostar Metals Ltd.
Heliostar is a junior exploration and development company with a portfolio of high-grade gold projects in Alaska and Mexico. The company's flagship asset is the 100-per-cent-controlled Unga gold project on Unga and Popof Islands in Alaska. The project hosts an intermediate sulphidation epithermal gold deposit, located within the district-scale property that encompasses 240 square kilometres across the two islands. Additional targets on the property include porphyry, high-sulphidation and intermediate-sulphidation epithermal veins. On Unga Island, priority targets include the SH-1 and Aquila, both on the Shumagin trend; the former Apollo-Sitka mine, which was Alaska's first underground gold mine; and the Zachary Bay porphyry gold-copper prospect. Gold mineralization at the Centennial zone is located on neighbouring Popof Island within four kilometres of infrastructure and services at Sand Point.
In Mexico, the company owns 100 per cent of three early-stage epithermal projects in Sonora that are highly prospective for gold and silver. Cumaro forms part of the El Picacho district while the Oso Negro and La Lola projects are also prospective for epithermal gold-silver mineralization.
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