Hochschild Mining PLC ("Hochschild" or the "Company") (LSE: HOC) (OTCQX: HCHDF) is pleased to announce that it has entered into a definitive agreement with Amarillo Gold Corporation ("Amarillo") (TSXV: AGC) (OTCQB: AGCBF) pursuant to which Hochschild has agreed to acquire all of the issued and outstanding shares of Amarillo (the "Transaction") at a price of C$0.40 per share in cash (the "Cash Offer"). Pursuant to the Transaction, Hochschild will acquire a 100% interest in Amarillo's flagship Posse gold project ("Posse") located in Goiás State, Brazil.

In addition, shareholders of Amarillo will receive shares in a newly formed company, Lavras Gold Corp., which will hold a stake in the Lavras do Sul project, C$10 million of cash, and a 2.0% net smelter revenue royalty on certain exploration properties owned by Amarillo and located outside the current Posse resource and mine plan at Amarillo's Mara Rosa property. The net acquisition cost to Hochschild, including the Cash Offer, cash provided to Lavras Gold Corp. and Amarillo's net cash as at September 30, 2021, is estimated to be C$135 million.

The Transaction constitutes a Class 1 Transaction under the UK Listing Rules due to the level of Posse's Proven and Probable Reserves relative to those of Hochschild. As such, the Transaction is subject to Hochschild shareholder approval as well as the approvals of Amarillo shareholders, the Canadian court, regulatory authorities and the satisfaction of certain other customary conditions. The Transaction has been unanimously recommended by the board of directors of Amarillo and has the full support of Amarillo's major shareholders, Baccarat Trade Investments Ltd. and Eric Sprott. The board of directors of Hochschild (the "Board") believes the Transaction is in the best interests of Hochschild's shareholders. Accordingly, the Board unanimously intends to recommend that shareholders vote in favour of the Transaction. Completion is expected to occur in the first quarter of 2022.

Key Acquisition Highlights

§ Aligns with Hochschild's core strengths and long-term strategy of acquiring and optimising development stage projects in the Americas

§ Enhances the Company's portfolio by adding a long-life asset located in a mining friendly jurisdiction

§ Provides exposure to a high-quality project with attractive costs where certain infrastructure construction is underway

§ Offers compelling near-mine and regional exploration opportunities

§ Complementary ESG-led approach with strong local community and government support

§ Maintains Hochschild's financial strength and flexibility

Ignacio Bustamante, Chief Executive Officer, said:

"The acquisition of Amarillo enhances the Company's project pipeline and is the result of a long-term Company review process of a wide range of growth opportunities. Posse is an attractive low-cost project with relatively near-term production and strong exploration upside potential. With our significant experience in developing precious metal deposits in the Americas, Hochschild is ideally placed to take Posse to its next stage and generate strong sustainable value for the Company and the project's local stakeholders."

Posse Overview

Posse is an open pit gold project located in Mara Rosa in the mining friendly jurisdiction of Goiás State, Brazil. The brownfield project benefits from existing infrastructure and attractive costs. Construction of certain infrastructure is underway, with the project having received the License to Install from state regulators in February 2021 and approval for the power line in October 2021. Hochschild has revised the Posse mine plan contained in the August 2020 Definitive Feasibility Study, and will include further details in a mineral expert's report to be incorporated in a shareholder circular (the "Circular") to be sent to holders of Hochschild's ordinary shares ("Hochschild Shareholders") in connection with the Transaction.

Table 1: Hochschild's Posse Mine Plan Forecasts

Initial Mine Life 10 years

Average Annual Production ~80koz Au (~100koz Au over the first four years)

Average Annual AISC US$750/oz Au - US$850/oz Au

Initial Capex US$180m - US$200m
Sustaining Capex ~US$40m

After-Tax NPV5% at US$1,600/oz Au US$150m - US$160m

After-Tax IRR at US$1,600/oz Au 18% - 20%

After-Tax NPV5% at US$1,800/oz Au US$200m - US$240m

After-Tax IRR at US$1,800/oz Au 24% - 26%

Table 2: Posse NI 43-101 Proven and Probable Reserves

Tonnes (Mt) Au (g/t) Au (koz)
Proven 11.8 1.20 456
Probable 12.0 1.16 446
Proven and Probable 23.8 1.18 902

Table 3: Posse NI 43-101 Measured, Indicated and Inferred Resources

Tonnes (Mt) Au (g/t) Au (koz) Measured 14 1.2 510Indicated 19 1.1 640
Measured and Indicated 32 1.1 1,200
Inferred[1] 0.1 0.6 1.7
Exploration Potential Overview

Hochschild has identified compelling near-mine and regional exploration opportunities for Posse and the Mara Rosa property. Posse is open down plunge to the southwest, providing potential to extend the mine life near the existing pit shell. There is also an opportunity to define multiple satellite deposits along the 10 km Posse structural trend including the Araras, Speti 24 and Pastinho priority targets. Recent drilling has identified Pastinho as a promising target with similar geological characteristics to Posse and multiple parallel gold structures extending from the surface to approximately 200 m of vertical depth while remaining open. In addition to the 2,500 hectares of mining concessions containing the Posse deposit and the 6,000 hectares of exploration concessions on the Posse structural trend, Hochschild will acquire an additional 59,000 hectares of regional exploration concessions on the Mara Rosa property.Transaction Summary and Details

The Cash Offer represents a premium of approximately 66% to the 20-day volume weighted average price of Amarillo's common shares on the TSX Venture Exchange on 29 November 2021.

The Transaction will be implemented by way of a statutory plan of arrangement under the Business Corporation Act (British Columbia). The Transaction will be subject to the approval of 66 2/3% of the votes cast by the holders of Amarillo's common shares ("Amarillo Shareholders") present in person or represented by proxy at the special meeting relating to the Transaction (the "Special Meeting"). In addition to security holder approval, the Transaction is subject to the receipt of court approval and other customary closing conditions for transactions of this nature.

Amarillo's board of directors has unanimously recommended that Amarillo Shareholders vote in favour of the Transaction at the Special Meeting, as the Amarillo directors and officers that hold securities in Amarillo intend to do in respect of their own beneficial holdings of Amarillo's securities, representing approximately 7% of the existing share capital of Amarillo as at 29 November 2021.

Baccarat Trade Investments Ltd., Eric Sprott and the directors and officers of Amarillo, holding common shares and options reflecting in aggregate approximately 46% of Amarillo's issued and outstanding common shares on a fully diluted basis, have entered into voting and support agreements with Hochschild, pursuant to which they have agreed, among other things, to vote their Amarillo securities in favour of the Transaction.

As a Class 1 transaction, it will also require the approval of a simple majority of the votes cast by Hochschild Shareholders. Hochschild expects to send the Circular to Hochschild Shareholders in due course convening a general meeting (the "General Meeting") to vote on a resolution approving the Transaction.



Hochschild's Board unanimously intends to recommend that Hochschild Shareholders vote in favour of the Transaction, as each of the Hochschild directors that holds ordinary shares in Hochschild intends to do in respect of their own beneficial holdings, representing approximately 39% of Hochschild's issued share capital as at 29 November 2021.

Pelham Investment Corporation, an entity controlled by Eduardo Hochschild and a holder of approximately 38% of Hochschild's issued and outstanding ordinary shares, has entered into a voting and support agreement pursuant to which it has agreed, among other things, to vote its Hochschild ordinary shares in favour of the Transaction.



The definitive agreement includes customary deal-protection provisions. Amarillo has agreed not to solicit or initiate any discussion regarding any other business combination, subject to customary "fiduciary out" rights. Amarillo has also granted Hochschild a right to match any superior proposal and will pay a termination fee of C$5.0 million to Hochschild in certain circumstances, including if the definitive agreement is terminated in connection with Amarillo pursuing a superior proposal. Hochschild has agreed to pay a termination fee of C$2.5 million to Amarillo if Hochschild terminates the definitive agreement in certain circumstances or if Hochschild Shareholders fail to approve the Transaction at the General Meeting.

Further details of the Transaction and the definitive agreement will be included in the Circular, which will be sent to Hochschild Shareholders in due course. The Transaction is expected to close in the first quarter of 2022.



The Transaction will be funded from Hochschild's current cash balance and/or undrawn credit facility.

Amarillo Financial Information

Amarillo had C$32.3 million of cash, gross assets of C$92.4 million and no debt as at 30 September 2021, and generated a loss before income tax of C$3.9 million for the year ended 31 December 2020.

Advisors and Counsel

Hochschild has engaged RBC Capital Markets as its financial advisor, sole sponsor and corporate broker, Stikeman Elliott LLP as its Canadian legal counsel, Pinheiro Neto Advogados as its Brazilian legal counsel, and Linklaters LLP as its UK legal counsel in connection with the Transaction.


A special committee comprised of directors of Amarillo has engaged Research Capital Corporation as its advisor. Research Capital Corporation has provided its verbal fairness opinion to Amarillo's special committee and board of directors, as of the date of the fairness opinion, and subject to the limitations, qualifications and assumptions disclosed to Amarillo's special committee and board of directors in connection therewith, that the consideration to be received by Amarillo's shareholders pursuant to the Transaction is fair, from a financial point of view, to Amarillo's shareholders. The full text of the written fairness opinion, which describes the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken, will be included in Amarillo's management information circular. Amarillo has engaged Irwin Lowy LLP as its legal counsel and Osler, Hoskin & Harcourt LLP as counsel to its special committee in connection with the Transaction.

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A webcast will be held at 12pm (London time) on 30 November 2021 for analysts and investors.

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