Transcript
Automated transcript · Written by software from the replay's audio. It can mishear names and figures; the replay is the record.
0:08 Good morning. My name is Anne-Marie Brissenden and I'm the head of investor relations for Amarillo Gold Corporation. This morning's webcast will focus on our acquisition by Hothchild Mining, which we announced last night. Our speakers today are Mike Muechler, President and CEO, and Hemdet Saw, CFO.
0:33 Please note that we will make forward-looking statements during this webcast. For full details, including disclaimers in cautionary language, please refer to our news release on the acquisition, which is available on our website, www.amaryllagold.com
0:49 and under our profile on CDER. We are also recording this webcast and the recording will be posted to our website. You will be able to ask questions following our short presentation. If you would like to ask a question, please use the Q&A tab found on the right hand of your screen and we will answer them in the order that they are received. I'd now like to turn it over to Mike. Thanks, Anne-Marie. This acquisition is a culmination of our exploration and development success in Brazil. It delivers an immediate and compelling opportunity for our shareholders to monetize their investment in Amarillo at an attractive valuation and a significant premium to the current and historical trading price of our shares.
1:35 At the same time, shareholders will continue to participate directly in the potential upside of Labris da Sur Gold project in Brazil through formation of a new exploration company, Labris Gold Corp. We expect the new company to be well capitalized at its inception, with significant cash and no debt. It will be led by Amarillo's current management team, and we anticipate that there will be a share consolidation following the completion of the transaction.
2:05 I'd like to now turn it over to Hamdat, our CFO, who will review the details of the transaction. Hamdat? Thanks, Mike. We have an agreement with Hochschild Mining whereby Hochschild will acquire all our issued and outstanding shares by way of plan of arrangement. Canadian per share and shares in a new company, Lavras Gold Corp. Spinco, that will hold a stake in the Lavras du Sur project, $10 million Canadian in cash, a 2% net smelter royalty on certain exploration properties located outside the Posse Gold Project and Mine Plan.
2:57 The cash consideration excluding the value of Spinco shares represents a premium of 66% over the 20-day trading volume weighted average trading price of the Amarillo shares on the TSX-V of 24 cents Canadian. The total transaction value is approximately 165 million Canadian, excluding Lavras's Spinco's asset value and a $10 million cash. The transaction is subject to the approval of both Amarillo and Hochschild shareholders, court approval, regulatory approval, and other customary conditions.
3:45 Mike. Thanks, Hemdat. Our board of directors unanimously intends to recommend the shareholders vote for the transaction and Hofschild's board intends to do the same. Our 2 largest shareholders, Baccarat Trade Investments and Eric Sprott, as well as the directors and officers of Amarillo have entered into agreements supporting the transaction. This represents 46% of the shares outstanding. I'd now like to talk a little bit about Hothschilds Mining. Hothschilds is a leading precious metals company primarily focused on silver and gold exploration and mining. With a head office in Lima Peru and corporate offices in London England, Hothchilds has more than 50 years of experience in mining.
4:31 They currently operate 3 underground mines and are advancing numerous projects in the Americas.
4:39 Hothchild shares our ESG values and highlights the keys to our social license, which include dry stack tailings, strong government support, training programs, employee safety, and ongoing communication with the communities where we operate. Hothchilds anticipates starting construction in the first half of 2022 and aim to be in production at the end of 2023. I'd now like to talk a little bit about Labris Gold Corp, the new exploration company. Our vision for Labris is to be a leading independent exploration and production company in Brazil. Our goal is to maximize shareholder value by bringing a disciplined exploration approach to the Labras do Sur gold project and other potential opportunities.
5:28 The Labras do Sur project is located in southern Brazil in Rio Grande do Sur state. Labras has 22,000 hectares of exploration concessions and historic gold workings that date back to the 1700s. With multiple anomalies over multiple kilometers, Labras has the potential to be a district scale. We recently consolidated our land position there this year and acquired an additional exploration property. We've begun to explore for new economic gold deposits on the property, much of which had not been subject to modern exploration methods until we started working there. We have since identified 23 targets at Labrys. The most advanced target is Gutia, which has a 43-101 resource dated September 2010 of approximately 523,000 ounces.
6:23 We've also done work at a second target, Matilde, where we are exploring a significant gold-hosted structural zone and a 9 square kilometer gold and soil anomaly. We have asked the results from 2 holes 50 meters apart, returning 0.62 grams per ton, over 63 meters, and 0.7 grams per ton, over 145 meters. Both holes have long intervals of high-grade mineralization and elevated gold values starting from surface.
6:55 We envision a hub and spoke setup at Labrys where we will have a mine and mill at one of the largest targets which is also fed by satellite deposits on the property. We believe this will be a multi-million ounce district and are working hard to get to that first million ounces, which will likely come from Boutilla and Matilde. That's why we are excited to move forward with Labris, confident that the development of Poste will be in good hands. In summary, we believe this arrangement with Hothchilds delivers an immediate and compelling opportunity for our shareholders. They will be able to receive value, realize value for a large portion of Amarillo's assets at an attractive premium while continuing to participate in the potential upside of Lavras. We expect to hold a special meeting of shareholders to consider the arrangement in early 2022, and we'll mail an informational circular prior to that meeting.
7:50 We will still be going ahead with our planned annual and special meeting on December 16th and the circular for that meeting has been mailed already. Rothschilds is expected to hold their shareholder vote in mid-March, so we expect to close the transaction towards the end of the first quarter. I'd now like to open it up to questions. If you have a question, please type it in the Q&A tab found on the right-hand of your screen and we will answer them in the order that they are received. Our first question is, will the new SPIN Co. Be publicly listed? Yes, our plan is to publicly list SPIN Co. Closing or soon thereafter. Another question is, first of all, expressing congratulations to the Board of Management.
8:45 And is there any restrictions or impediment to another white knight offering a higher bid? There are no restrictions. Mike Graham, do you want to tell us how you're reacting to this announcement? I'm assuming that you're happy with it. We're very happy with the announcement. It's a culmination of a lot of work over the last few years. As we mentioned, it's a culmination of our exploration and development success. This is a good deal for our shareholders. It allows them to receive a significant premium on their on the recent trading price and it helps them to avoid any dilution that would have been a part of the construction financing as we move ahead towards building Posey and it also eliminates any execution risk. So we feel it is a very good deal for our shareholders.
9:37 It also gives them the opportunity to continue to participate in the exploration upside of the properties around Posey at the particularly the Castillo property, where we will have a 2% NSR. And of course at the Laversoe sewer property, where we believe we'll see a multi-million ounce district that will develop into a significant mining operation. How about you Hamza? Well, we've worked very hard to advance Posse to where it's at, to get it close to construction ready. And we believe it will be in good hands with Hochschild, who has the financial resources and the human resources as well to carry this project forward.
10:23 And I'm very excited with respect to our lava reserve project in the south. The geology there is tremendous. We also feel that this is a good arrangement for our stakeholders at the Pose Mine, the employees, the community, the regulators. Hothchilds does want to move ahead with the project. They do intend to maintain a construction schedule, starting construction early in the new year. So it is a good opportunity for the post-A stakeholders to see the mine move forward on a rapid development schedule. We're also very proud of our Brazilian team that we've assembled over the past few months. And they've been working very hard and they're quite capable of taking this project forward. So congratulations to our Brazilian team as well.
11:18 We've had a question come in about Hothchild. Do they have any Brazilian operations? No, they don't. They're interested in getting a toehold in Brazil. They have 2 operating underground mines in Peru, another one in Argentina, but this will be their first foray into Brazil. But that's something they were very much interested in getting a toehold into Brazil, building the Pose mine and using that to potentially grow their business in Brazil. If you would like more information about Hothchild, I would urge you to visit their website where you can get the details on their operations. And I believe they had a webcast this morning on the deal and I'm sure that you can listen in to hear more about them.
12:06 So we have another question. What will the Spinco share structure look like after the transaction? Approximately what percentage will the Amarillo shareholders hold after the transaction? So Amarillo shareholders will hold 100 percent of Spinco. Currently the the transaction is envisioned to do 1 share of Spinco per share of Amarillo. We'll likely do a share consolidation shortly thereafter to simplify things. But it is a one-for-one participation in SPINCO. Hamdat, did you have anything to add about the structure of Spinco? No, Mike said it correctly. Okay, well thank you all for your time this morning.
12:54 Because we don't have any more questions, I'm going to turn it back to Mike. Thanks Annemarie, and thanks everyone for attending this morning. We'll have a lot of news coming out over the coming months. Of course, we do have our AGM coming up on December 16th. We'll be putting out a circular on the proposed transaction early in the new year and organizing a special shareholder meeting for later in January. But we're very excited by this opportunity and look forward to moving it forward and closing in Q1. Thank you. That concludes our call. A recording will be available on our website and YouTube channel later this week. If you have any further questions, please do not hesitate to reach out to any one of us.
13:40 Thanks, have a great day and a very happy start to the start of the holiday season.
