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Trek Mining, NewCastle Gold and Anfield Gold Announce Business Combination to Create Equinox Gold

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Beleggingsadvies 26/10/2017 06:31
-Creates New Low-Cost Near-Term Gold Producer
Ross Beaty to be Chairman and a Significant Shareholder

US$85 Million Construction Facility and Access to US$200 Million for Development and Acquisitions

Trek Mining Inc. (TSX-V: TREK) (“Trek Mining”), NewCastle Gold Ltd. (TSX: NCA) (“NewCastle”) and Anfield Gold Corp. (TSX-V: ANF) (“Anfield”) are pleased to announce the signing of a definitive agreement (the “Agreement”) to combine their businesses (the “Transaction”). The combined entity intends to operate under the name Equinox Gold Corp. (“Equinox Gold”) and expects to trade on the TSX Venture Exchange (“TSX-V”) under the ticker symbol “EQX”. Led by Ross Beaty as Chairman, and with the executive team led by Christian Milau as CEO and Greg Smith as President, Equinox Gold will be a well-financed gold mining company with a near-term strategy to become a profitable, multi-asset, low-cost gold producer. Shareholders of Trek Mining and NewCastle Gold will each own 44% of Equinox Gold, with Anfield Gold shareholders owning 12%.

TRANSACTION WEBCAST
The companies hosted a joint webcast on October 25, 2017 to discuss the transaction. Login to the webcast. Download the slides.

EQUINOX GOLD HIGHLIGHTS
•Near-term and growing gold production: First gold pour from Aurizona targeted for late 2018 with expected average annual production of 136,000 ounces1; potential to significantly increase production with subsequent mine development at Castle Mountain
•Robust project portfolio: Multi-asset gold and copper portfolio including two advanced-stage gold projects in well-established mining jurisdictions
•Substantial gold resource: Combined Measured and Indicated gold resources of 5.8 million ounces and additional Inferred gold resources of 2.5 million ounces2
•Significant exploration potential: Drilling currently underway to potentially increase resources at both the Aurizona and Castle Mountain properties; plus upside from a portfolio of highly prospective gold and copper properties
•Strong financial platform: Approximately C$98 million in cash and marketable securities, with plans to realize corporate G&A savings and monetize selected non-core assets. Well funded with a US$85 million credit facility to fully fund the construction of Aurizona, and access for up to US$200 million in funding for future project development and acquisitions, providing significant capacity to develop Castle Mountain and continue to grow the company
•Strategic leader and shareholder: Ross Beaty will join as Chairman and invest approximately US$20 million to become a significant shareholder, owning approximately 11% of Equinox Gold after Transaction close
•Experienced leadership team: Executive team and directors are invested shareholders with significant technical, construction and operations experience

Ross Beaty, Anfield’s largest shareholder and Chairman of Equinox Gold, said: “Combining these companies to form Equinox Gold creates a well-capitalized, growth-focused gold company with an experienced management team and an impressive portfolio of gold and copper assets. I look forward to working with the Equinox Gold team to rapidly build a leading gold producer.”

Christian Milau, CEO of Trek Mining, said: “The Aurizona and Castle Mountain projects are both large gold assets with a strong geological foundation and exceptional growth potential. Combining them in Equinox Gold creates a company that is well positioned among its peers, with fully-funded near-term production and a long-term growth profile. We are particularly pleased that Ross Beaty will be leading the Equinox Gold board as Chairman. Ross is one of the foremost mining entrepreneurs of our generation. His insight, experience and track record of success will be invaluable as we advance our assets and continue to build the company.”

Richard Warke, Executive Chairman of NewCastle, said: “Combining NewCastle with Trek Mining and Anfield significantly enhances the near- and long-term growth potential for NewCastle shareholders. With the Aurizona mine expected to commence production in late 2018 and potential to add significant production from Castle Mountain, Equinox Gold will have one of the most rapid growth profiles in its peer group. I look forward to working with Ross and the Equinox Gold management team as we work to build a significant gold company.”

EQUINOX GOLD ASSETS
Upon completion of the Transaction, Equinox Gold will own 100% of two past-producing gold mines: Aurizona in Maranhão, Brazil and Castle Mountain in California, USA. A July 2017 feasibility study for Aurizona outlined the design of an open-pit gold mine producing on average approximately 136,000 ounces of gold per year with an initial 6.5-year mine life and significant exploration upside. Initial capital to fund construction and commissioning is estimated at US$130.8 million with all-in-sustaining costs estimated at US$754 per ounce.1 Early works construction has commenced at Aurizona and orders have been placed for long-lead items, with first gold pour planned for late 2018. At Castle Mountain, a pre-feasibility study is underway to assess a two-phase approach to resuming production before the end of 2020.

In addition to its Aurizona and Castle Mountain projects, Equinox Gold will hold an 83% interest in the Koricancha Mill, an operating gold processing facility in Peru; 100% of the Coringa project, a feasibility-stage gold project in Brazil; and 100% of the Elk Gold project, a high-grade past-producing gold project in Canada.

Combined, the gold projects have Proven & Probable gold reserves of 1.1 million ounces grading 1.71 grams per tonne (“g/t”) gold, Measured & Indicated gold resources (inclusive of reserves) estimated at 5.8 million ounces grading 0.81 g/t gold, and Inferred gold resources estimated at 2.5 million ounces grading 0.70 g/t gold.2

Equinox Gold will also hold 100% of the highly prospective Warintza and Ricardo porphyry copper exploration projects in Ecuador and Chile, respectively, and 60% of the La Verde porphyry copper project in Mexico. The La Verde project has Measured & Indicated copper resources of 3.7 billion pounds grading 0.41% copper and Inferred copper resources of 2.7 billion pounds grading 0.37% copper. The Warintza project has an Inferred copper-equivalent resource of 2.1 billion pounds grading 0.61% copper-equivalent.2

Anfield currently owns the Coringa gold deposit in Brazil and a financial receivable from the sale of its nickel deposit in Guatemala. Anfield is divesting both assets and will apply all sale proceeds toward the advancement of Equinox Gold’s flagship assets.

MANAGEMENT AND DIRECTORS
Equinox Gold will be managed by the current Trek Mining executive team and will be based in Vancouver. The operational teams for each project will remain in place. The proposed Board of Directors will be led by Ross Beaty as Chairman with Christian Milau, Greg Smith, and Marcel de Groot joining from Trek Mining, Jacques McMullen and Lenard Boggio joining from NewCastle, and Marshall Koval joining from Anfield. Richard Warke, Executive Chairman of NewCastle, will continue with Equinox Gold as a strategic advisor and significant shareholder.

SPROTT CREDIT FACILITY
Sprott Private Resource Lending (Collector), L.P. (“Sprott”) has received investment committee approval to provide Trek Mining with a US$85 million senior secured credit facility to be used for construction of the Aurizona mine (the “Credit Facility”). The Credit Facility will have a five-year term, incur interest at an annual rate of 7%, plus the greater of US 3-month LIBOR or 1%, and will be repaid in quarterly installments commencing in September 2019 and ending in September 2022.

In connection with the Credit Facility, Sprott will be entitled to a production payment of US$20 per gold ounce on 75% of the first 400,000 ounces of gold produced from Aurizona. Further, Trek Mining will issue to Sprott 8.0 million five-year at-market common share purchase warrants.

The terms of the Credit Facility are not subject to technical due diligence by Sprott. The Credit Facility remains conditional on completion of legal and formal documentation and is expected to be completed prior to closing the Transaction.

In addition to the Credit Facility, Sprott has agreed to provide up to US$200 million to fund future development projects and acquisitions (the “Development and Acquisition Facility”), which could include development of the Castle Mountain project. The Development and Acquisition Facility is subject to, among other items, negotiation, documentation and approval by Sprott’s investment committee.

Greg Caione, Partner of Sprott, commented: “Sprott is excited to partner with Equinox Gold on development of the Aurizona mine. Our partnership with the Equinox Gold team is consistent with our strategy of providing innovative and flexible capital to maximize the value of exceptional projects.”

TRANSACTION DETAILS
Under the terms of the Agreement, Trek Mining will acquire all outstanding shares of NewCastle and Anfield at a share exchange ratio of 0.873 Trek Mining shares for each NewCastle share (the “NewCastle Exchange Ratio”) and 0.407 Trek Mining shares for each Anfield share (the “Anfield Exchange Ratio”). Each NewCastle and Anfield warrant and option will become exercisable for Trek Mining common shares, as adjusted in accordance with the appropriate Exchange Ratio. Based on the applicable Exchange Ratios, upon completion of the Arrangement, former Trek Mining shareholders will own 44% of Equinox Gold, former NewCastle shareholders will own 44% and former Anfield shareholders will own 12%.

Subject to, and concurrent with, closing of the Transaction, Ross Beaty will acquire approximately 22.5 million common shares of Equinox Gold. The shares will be purchased pursuant to a share and debenture purchase agreement between Trek Mining, Ross Beaty and Sandstorm Gold Ltd. (“Sandstorm”), whereby Sandstorm will sell to Ross Beaty 4.0 million common shares of Trek Mining and US$15.0 million principal of the debenture payable by Trek Mining to Sandstorm at a combined purchase price of approximately US$18.2 million. The debenture will be converted to approximately 18.5 million common shares concurrent with closing of the Transaction. On closing of the Transaction, Ross Beaty is expected to own approximately 11% of Equinox Gold.

Upon completion of the Transaction, Equinox Gold as the combined company will have approximately 423.0 million common shares issued and outstanding.

The Transaction is expected to be structured as a plan of arrangement under the Business Corporations Act (British Columbia) and, in addition to other customary closing conditions, is subject to regulatory and court approvals or orders, and continuing NewCastle from Ontario to British Columbia. The Transaction will need to be approved by (i) two-thirds of the votes cast by NewCastle and Anfield shareholders at their respective shareholder meetings and (ii) if required, a simple majority of the votes cast by NewCastle and Anfield shareholders at their respective shareholder meetings, excluding the votes held by certain persons as required by Multilateral Instrument 61-101. There is no regulatory requirement for a meeting of Trek Mining shareholders.

The special meetings of NewCastle and Anfield are expected to be held in December 2017. A joint information circular detailing the terms and conditions of the Transaction will be filed with regulatory authorities and mailed to the shareholders of both NewCastle and Anfield in November in accordance with applicable securities laws. The Agreement includes customary deal-protection provisions, including non-solicitation of alternative transactions and break fees of C$18 million payable by Trek Mining or NewCastle, and C$3.2 million payable by Anfield, under certain circumstances.

BOARD OF DIRECTORS’ RECOMMENDATIONS AND VOTING SUPPORT
The Board of Directors of both NewCastle and Anfield have received independent fairness opinions with respect to the fairness of the consideration to be received by the shareholders of NewCastle and Anfield under the Arrangement, respectively, from a financial point of view, and the Board of Directors of Trek Mining has received an independent fairness opinion that the Agreement is fair, from a financial point of view, to Trek Mining. The Board of Directors of each company have unanimously approved the Agreement.

The Board of Directors of both NewCastle and Anfield are recommending approval of the Agreement by their respective shareholders. All of the directors and senior officers of NewCastle and Anfield and certain significant shareholders of each company have entered into lock-up agreements pursuant to which each has agreed to vote in favour of the Agreement, representing approximately 25.5% of the issued and outstanding common shares of NewCastle and 27.2% of the issued and outstanding common shares of Anfield, respectively.

ADVISORS AND COUNSEL
Cormark Securities Inc. has provided a fairness opinion to the Board of Directors of Trek Mining, TD Securities Inc. has provided a fairness opinion to the Board of Directors of NewCastle and Fort Capital Partners has provided a fairness opinion to the Board of Directors of Anfield. Blake, Cassels & Graydon LLP is acting as legal counsel for Trek Mining, Fasken Martineau DuMoulin LLP is acting as legal counsel for NewCastle and Borden Ladner Gervais LLP is acting as legal counsel for Anfield.

QUALIFIED PERSONS
David Laing, BSc, MIMMM, Trek Mining’s Chief Operating Officer, and Scott Heffernan, MSc, P.Geo., Trek Mining’s EVP Exploration, are the Qualified Persons under NI 43-101 for Trek Mining and have reviewed, approved and verified the technical content of this news release as it relates to Trek Mining’s Aurizona, Warintza, Ricardo and Elk Gold Projects, and the Koricancha Mill.

Marc Leduc, P.Eng., NewCastle’s Interim Chief Executive Officer, is the Qualified Person under NI 43-101 for NewCastle and has reviewed, approved and verified the technical content of this news release as it relates to NewCastle’s Castle Mountain and La Verde projects.

Leo Hathaway, MSc, P.Geo., Anfield’s Chief Geological Officer, is the Qualified Person under NI 43-101 for Anfield and has reviewed, approved and verified the technical content of this news release as it relates to Anfield’s Coringa Project.


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