Mr. Frederic Leigh reports
ESV RESOURCES ENTERS INTO AGREEMENTS TO ACQUIRE PAST PRODUCING GUIA ANTIGUA SILVER PROJECT AND ZANCUDO SILVER-GOLD PROJECT IN COLOMBIA. NAME CHANGE TO DENARIUS SILVER CORP.
ESV Resources Ltd. will engage in the exploration, development and mining of silver-gold projects, and it has entered into letters of intent, each dated effective Sept. 23, 2020, with Gran Colombia Gold Corp. and 1255269 B.C. Ltd. (the Guia Antigua vendor) to acquire its first two projects, both located in historic mining districts in Colombia. The LOIs outline the general terms and conditions by which the company will concurrently acquire the Zancudo project from Gran Colombia as well as all of the outstanding share capital of the Guia Antigua vendor, which controls the Guia Antigua project.
Each of the company, Gran Colombia, the Guia Antigua vendor and all the shareholders of the Guia Antigua vendor are at arm's length, and the transaction will constitute a change of business and a reverse takeover for the company in accordance with the policies of the TSX Venture Exchange. Assuming completion of the transaction, it is anticipated that the company will be listed on the exchange as a Tier 2 mining issuer. In connection with completion of the transaction, it is anticipated that the company will change its name to Denarius Silver Corp.
Guia Antigua project
The Guia Antigua project encompasses the exploration, development and mining rights to a 386-hectare area located in the eastern part of Gran Colombia's Segovia mining title focused on the Guia Antigua vein, which falls outside the areas associated with Gran Colombia's mining operations and exploration activities. The Guia Antigua project is located 130 kilometres northeast of Medellin (227 km by road) in the Segovia-Remedios mining district, department of Antioquia, northwestern Colombia, and is about five km east of the town and mining centre of Segovia.
The Guia Antigua project includes the historic silver-gold-producing Guia Antigua mine. Artisanal miner development work on two levels over a 150-metre strike length define the historical Guia Antigua mine. There has been no mechanized mining of the Guia Antigua vein. The Guia Antigua mine was operated by an unknown company prior to 2014 and by Sociedad Guias Gold, a private company, under contract with Gran Colombia from October, 2014, through October, 2016. Recorded production was 6,034 metric tons of ore with an average head grade of 404.9 grams per tonne silver and 6.05 g/t gold containing 78,558 ounces of silver and 1,173 ounces of gold, with a silver-gold ratio of 67. The prior production is not known and there has been no additional production since 2016.
The Guia Antigua vein is a high-grade silver-gold vein, which is oriented subparallel to an aphanitic dike hanging wall and highly weathered foliated metamorphic footwall within the Upper Jurassic Segovia batholith. There is a systematic increase in the silver grade and the silver-gold ratio from west to east in the Segovia mining title. From 2014 to 2016, Sociedad Guias Gold carried out systematic channel sampling of the Guia Antigua mine. A short drill program of 1,753.9 m was carried out in 2018 to 2019.
The Guia Antigua vendor is a privately held British Columbia corporation, established for the purposes of holding an interest in the Guia Antigua project. Aside from its interest in the Guia Antigua project, the Guia Antigua vendor has no assets or material financial liabilities or obligations.
The Zancudo project consists of a 1,052-hectare mining concession area located in the Titiribi mining district in Antioquia, Colombia, about 27 km southwest of Medellin. Zancudo comprises a historical gold mine (the Independencia mine) located in the Middle Cauca gold belt. The estimated total historical production dating back to 1793 is 1.5 million to two million ounces of gold equivalent with recovered grades of 14.6 g/t Au and 108 g/t Ag. The Independencia mine exploited an epithermal intermediate sulphidation type vein system over 3.5 km strike length and to a depth of approximately 300 m.
Gran Colombia acquired Zancudo in 2010 and completed a 14,000 m drilling program in 2011 and 2012. In March, 2017, Gran Colombia signed an option agreement with Iamgold Corp. for the exploration and potential purchase of an interest by Iamgold in Zancudo. Under the agreement, Iamgold has been granted an option to acquire an initial undivided 65-per-cent interest in Zancudo by incurring an aggregate of $10-million (U.S.) of mineral exploration expenditures over a six-year period, subject to meeting specified annual work commitments during this period. From 2017 through 2019, Iamgold has completed a total of approximately 16,224 m of drilling at Zancudo and has incurred over $4-million (U.S.) of its exploration commitment. However, due to COVID-19, Iamgold has suspended its drilling program thus far in 2020. Iamgold has also been granted an additional option to acquire a further 5-per-cent undivided interest, for an aggregate 70-per-cent undivided interest in Zancudo, by completing a feasibility study within three years after exercising the first option. Upon exercise of the first option or the second option, as the case may be, the parties will form a joint venture to hold Zancudo, to advance the exploration, and, if feasible, to advance the development and mining of any commercially exploitable ore body.
In conjunction with its exploration campaign, Iamgold has implemented a number of environmental, social and governance initiatives in the local community at Zancudo, including a beekeeping project focused on providing training to local beekeepers, improving efficiency in honey production and marketing support.
Terms of the transaction
Under the terms of the transaction, shareholders of the Guia Antigua vendor will be issued 15 million common shares of the company in exchange for all of the outstanding share capital of the Guia Antigua vendor, and concurrently Gran Colombia will be issued 27 million common shares of the company in consideration for the assignment of its interest in the Zancudo project. In addition to any escrow restrictions imposed by the policies of the exchange, all common shares issued to the shareholders of the Guia Antigua vendor and to Gran Colombia will be subject to a voluntary pooling arrangement from which one-quarter of the shares will be released on each of Dec. 28, 2020, March 27, 2021, June 27, 2021, and Sept. 27, 2021.
As a condition to completing the transaction, the parties intend to complete a non-brokered private placement financing to raise up to $7-million through the issuance of up to 15,555,000 subscription receipts of the Guia Antigua vendor at a price of 45 cents per subscription receipt. It is anticipated that Gran Colombia will subscribe for $3-million of the concurrent financing.
The proceeds of the concurrent financing will be held in escrow, pending the company receiving all applicable regulatory approvals and completing the Guia Antigua transaction. Upon satisfaction of the escrow conditions, immediately prior to completion of the transaction, each subscription receipt will automatically convert into one common share of the Guia Antigua vendor for no additional consideration and will be exchanged for common shares of the company on a one-for-one basis. If the transaction is not completed on or before Dec. 31, 2020, the proceeds of the concurrent financing will be returned to the subscribers. Finders' fees may be payable to arm's-length parties who introduce subscribers to the concurrent financing, in accordance with the policies of the exchange. It is anticipated that the proceeds from the concurrent financing will be utilized to undertake an exploration program at the Guia Antigua project, and for the general and administrative expenses of the company.
Following the closing of the transaction and the concurrent financing, the company expects to have approximately 88,199,912 common shares issued and outstanding.
Board of directors and management changes
On completion of the transaction, the company's board of directors and management team will be reconstituted to consist of the following individuals.
Jeff Couch, director
Mr. Couch is a financial services executive with extensive experience in the natural resources sector having advised and raised capital for clients globally, with a particular focus in emerging markets. Currently Mr. Couch is working with Orion Resource Partners, a mining-focused private equity firm. Orion has over $6-billion under management, and specializes in institutional metals and mining investment strategies in the base and precious metals space. Mr. Couch has worked with several financial services firms in Europe, including being head of investment banking, Europe, for BMO Capital Markets (Bank of Montreal). Mr. Couch has also had senior investment banking roles with Credit Suisse Europe and Citigroup (Solomon Brothers). He has public board experience in both the London Stock Exchange and Toronto exchange, and has advised several governments on their natural resources capital requirements. He holds both an undergraduate business degree and a law degree.
Frederic Leigh, director
Mr. Leigh is the principal of a private B.C. company providing fundraising, investor relations and advisory services. He has over 10 years of experience with companies in the mining and technology sectors worldwide, acting in an investor relations and advisory role for a number of publicly listed companies.
Paul Sparkes, director
Mr. Sparkes is an accomplished business leader and entrepreneur with over 25 years of experience in media, finance, capital markets and Canada's political arena. He spent a decade as a leader in the broadcast and media industry as CTVglobemedia's executive vice-president, corporate affairs. He also held senior positions in public service, including with the government of Canada as director of operations to Prime Minister Jean Chretien and as a senior aide to two premiers of Newfoundland and Labrador. Mr. Sparkes was a co-founder and executive vice-chairman at Difference Capital Financial, and serves on a number of private and public boards. He is currently president of Otterbury Holdings Inc., and is an adviser and deal maker for growth companies in the private and public markets.
Serafino Iacono, director
Mr. Iacono is an entrepreneur and business person who has either founded or been the head of several different companies operating in the mining and natural resources sector. He is currently the executive chairman of Gran Colombia, executive chairman and chief executive officer of Caldas Gold Corp. (a subsidiary of Gran Colombia), CEO and executive director at CruzSur Energy Corp., and chairman of Western Atlas Resources Inc. Mr. Iacono is also on the board of Pacific Infrastructure Ventures Inc. and Sociedad Portuaria Puerto Bahia SA, and a member of Blue Pacific Investments Group Ltd.
Lombardo Paredes-Arenas, director
Mr. Paredes-Arenas currently serves as CEO of Gran Colombia, and brings over 20 years of corporate leadership and operations management experience in the resource sector in Latin America. Before becoming an independent consultant on energy and environmental project development, Mr. Paredes held several roles with within Petroleos de Venezuela (PDVSA). He was responsible for regional planning of investments and social development for eastern Venezuela, and was managing director and a board member of Maraven SA (an affiliate of PDVSA), with responsibility for the construction and commissioning of the cardon refinery conversion project in Venezuela, a $2.6-billion (U.S.) project. He was also general manager of its production operations division, with 5,000 employees and oil production of 800,000 barrels per day. Mr. Paredes holds bachelor of science in mechanical engineering and master of economic analysis and financial economics degrees.
In addition to these appointees to the board and management, Augusto Garcia will be appointed president of the company's Colombian subsidiary. Mr. Garcia is a Colombian lawyer with more than 40 years experience in both the private and public sector. He has had multiple managerial positions, including deputy minister of mines of Colombia, deputy of Cormagdalena, deputy ambassador for Colombia in Spain, vice-president of Corporacion Financiera del Norte, and president of Carbones Colombianos del Cerrejon.
The company is currently evaluating candidates for the roles of CEO and chief financial officer.
Approval of the shareholders of the company will not be required in connection with the transaction, in accordance with TSX-V Policy 5.2, as the transaction does not involve related parties and no other circumstances exist that may comprise the independence of the company or other interested parties. The company is without active operations, is not subject to a cease trade order or trading suspension, and shareholder approval is not required for the transaction under applicable corporate or securities laws.
Upon completion of the transaction, Gran Colombia will become a new control person of the company. If required by the policies of the exchange, the company will obtain shareholder approval for the creation of a new control person by way of written consent of the majority of the outstanding common shares of the company prior to completion of the transaction.
Sponsorship of the transaction is required by TSX-V Policy 2.2, unless an exemption from the sponsorship requirement is available. The company will be seeking a waiver of any requirement for a sponsor in connection with the transaction.
Closing of the transaction is subject to a number of conditions including the satisfactory completion of due diligence, the negotiation and entering into of definitive agreements, the completion of the concurrent financing, receipt of all required shareholder, regulatory and third party consents, including exchange approval, and satisfaction of other customary closing conditions. The transaction and concurrent financing cannot close until the required approvals are obtained. There can be no assurance that the transaction and concurrent financing will be completed as proposed or at all. Except in connection with the concurrent financing, no finders' fees or commissions are payable in connection with completion of the transaction, and no advances or loans to the Guia Antigua vendor or Gran Colombia are contemplated prior to completion of the transaction. An administrative fee of 840,000 common shares is owing to Fiore Management & Advisory Corp., an arm's-length consultant, in consideration for the provision of certain financial and advisory services necessary to complete the transaction.
In connection with the transaction, the Guia Antigua vendor and Gran Colombia have commissioned updated geological reports on the Guia Antigua and Zancudo projects. Prior to completion of the transaction, copies of the geological reports will be filed and posted on SEDAR. Further information on the transaction will be available and posted on SEDAR upon completion of a filing statement that will be prepared by the company.
Trading in the common shares of the company will remain halted pending further filings with the exchange.
The scientific and technical data contained in this press release was reviewed and prepared under the supervision of Dr. Stewart D. Redwood, BSc (honours), PhD, FIMMM, FGS, consulting geologist, is a qualified person under National Instrument 43-101 -- Standards of Disclosure for Mineral Projects. Dr. Redwood has reviewed and approved the data related to the exploration information disclosed in this news release.
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