Aquila Resources Inc. (TSX: AQA,
OTCQB: AQARF) (“Aquila” or the “Company”) is pleased
to announce that it has entered into a definitive arrangement
agreement (the “Arrangement Agreement”) with Gold Resource
Corporation (“GORO”) (NYSE American: GORO) providing for the
acquisition by GORO of all the issued and outstanding common shares
of Aquila by way of a plan of arrangement under the Business
Corporations Act (Ontario) (the “Transaction”).
As announced by Aquila on September
7, 2021, pursuant to the Transaction GORO will, through a
wholly-owned subsidiary, acquire all the issued and outstanding
Aquila shares for 0.0399 of a GORO share per Aquila share (the
“Exchange Ratio”). Based upon the 20-day volume-weighted
average price (“VWAP”) of GORO’s shares on the NYSE American
stock exchange on September 3, 2021, being the last trading day
prior to the date of the announcement of the Transaction, the
Exchange Ratio represents a 29% premium to the 20-day VWAP of
Aquila’s shares on the Toronto Stock Exchange as of such date.
Upon closing of the Transaction, the
existing GORO and Aquila shareholders will own approximately 85.1%
and 14.9%, respectively, of the combined company on a fully diluted
basis.
Barry Hildred, Executive Chair of Aquila, commented, “We believe
strongly that the Transaction outlined in the Arrangement Agreement
provides significant benefits to Aquila shareholders. GORO has a
strong balance sheet, it owns a consistently profitable mine in the
Americas, and it has a highly accomplished technical and operating
team. As such, this Transaction materially de-risks the financing
and development of the Back Forty Project for the benefit of our
stakeholders.”
Guy Le Bel, President & CEO of Aquila, added, “The new Gold
Resource Corporation will be a multi-jurisdictional, diversified
precious and base metal producer with an attractive growth profile
underpinned by the Back Forty Project. We look forward to closing
the Transaction in short order.”
Strategic Rationale for the
Transaction
As previously announced on September 7, 2021, the benefits of
the Transaction to GORO and Aquila shareholders include the
following:
- Enhanced Market Presence and Re-Rating Potential. GORO
currently benefits from inclusion in the VanEck Junior Gold Miners
ETF (the “GDXJ”) and from an average daily trading volume of
approximately 1 million shares, trailing three months. The
Transaction is intended to result in the Back Forty Project being
placed into production on a more accelerated basis, funded by cash
flow generation, thus elevating the combined company to
intermediate producer status. Following the completion of the
Transaction, GORO is expected to continue to be included in the
GDXJ and to benefit from an enhanced capital markets profile in the
United States and Canada, as well as increased trading liquidity
and broadened appeal to global index, resource, and generalist
investors. This offers the potential for a re-rating to a multiple
more in line with other intermediate gold producers.
- Enhanced Project and Jurisdictional Diversification. Each of
GORO and Aquila is currently a single-asset, single-jurisdiction
company. Through the Transaction, GORO and Aquila shareholders will
have the opportunity to participate in the ongoing growth of a
multi-jurisdictional, diversified precious and base metal producer
with exposure to gold, silver, zinc, copper and lead through GORO’s
producing Don David Gold Mine in Oaxaca, Mexico and Aquila’s Back
Forty Project in Menominee County, Michigan.
- Growth Profile and Financial Strength of Combined Company. The
combined company is expected to benefit from a peer leading growth
profile, a robust balance sheet with no debt and cash of US$30.2
million at June 30, 2021, free cash flow generation from its Don
David Gold Mine and the synergies that generally accrue from scale
in the areas of general and administrative expenses, from less
duplication of salaries, wages and other public company expenses,
improved concentrate sales and marketing and supply chain
efficiencies.
- Materially De-Risks the Financing and Development of the Back
Forty Project for Aquila Shareholders. Benefitting from the free
cash flow generated by the Don David Gold Mine, Aquila shareholders
will not be diluted by a near-term equity financing that would
otherwise be required to advance the Back Forty Project through the
final stages of permitting and engineering. GORO is supportive of
Aquila’s project development plans including continuing working
towards an optimized Feasibility Study. The combined Company’s
position of financial strength is also expected to result in an
improved ability to access required additional financing to fund
the Back Forty Project’s construction capital expenditures.
- All-Stock Transaction Enables Aquila Shareholders to Maintain
Upside Exposure. Through their ownership in the combined company,
Aquila shareholders will maintain exposure to the value that is
expected to be unlocked as the Back Forty Project is advanced
towards construction and production. Despite being a proven gold
producer, GORO currently trades at only approximately 2.5 times
free cash flow from operations. Aquila shareholders will
participate in the anticipated re-rating of GORO from a one mine
company in Mexico to a two-mine company with jurisdictional
diversification.
- Experienced Management Team. The combined company will benefit
from GORO’s and Aquila’s technical and operational teams’ expertise
in polymetallic open pit and underground mines. The GORO executive
team has a demonstrated record of success in developing and
operating mining projects in the Americas.
- Demonstrated Consistent Dividend History. Post-Transaction,
GORO intends to continue to pay dividends in accordance with its
past practice. GORO has made consistent dividend payments to its
investors for more than ten years.
Transaction Summary
The Transaction will require the approval of (i) 66⅔ percent of
the votes cast by Aquila shareholders and (ii) a simple majority of
the votes cast by the minority shareholders (excluding shareholders
whose votes are required to be excluded pursuant to Multilateral
Instrument 61 – 101) at a special meeting of shareholders (the
“Aquila Shareholder Meeting”). The Aquila Shareholder
Meeting is scheduled to be held on November 17, 2021. The
Transaction is also subject to approval by the Ontario Superior
Court of Justice (Commercial List) and applicable stock exchange
approvals. The Transaction does not require the approval of GORO’s
shareholders.
In addition to shareholder, court and regulatory approvals, the
Transaction is also subject to the satisfaction of certain other
closing conditions that are customary for a transaction of this
nature, and each of GORO and Aquila has provided appropriate
interim period covenants regarding the operation of its business in
the ordinary course. The Arrangement Agreement includes customary
deal protection provisions pursuant to which Aquila has agreed not
to solicit any other acquisition proposal (subject to customary
fiduciary out rights), has agreed to grant GORO the right to match
any superior proposal, and will pay a termination fee of
US$1,000,000 to GORO if the Arrangement Agreement is terminated in
certain circumstances.
Details of the Transaction and the Arrangement Agreement will be
set out in the management information circular to be prepared and
mailed to Aquila shareholders in connection with the Aquila
Shareholder Meeting.
Subject to all conditions precedent to completion of the
Transaction being met, the Transaction is expected to close in late
November 2021. In connection with the closing of the Transaction,
Aquila will apply to have its shares delisted from the Toronto
Stock Exchange.
Support for the Transaction from Key
Aquila Stakeholders
Each of Orion Mine Finance and Hudbay Minerals Inc., which hold
28.3% and 10.4%, respectively, of the issued and outstanding Aquila
shares, has entered into a voting support agreement with GORO
pursuant to which they have agreed to vote their Aquila shares in
favour of the Transaction. In addition, all of the directors and
officers of Aquila holding approximately 1.9% of the issued and
outstanding Aquila shares in aggregate have also executed a voting
support agreement.
Osisko Bermuda Limited, which is a wholly-owned subsidiary of
Osisko Gold Royalties Ltd, and a party to gold and silver stream
agreements with Aquila relating to the Back Forty Project, has also
reiterated that it considers GORO to be an approved purchaser under
those agreements, and that it is supportive of the Transaction.
Board Approvals
The Arrangement Agreement has been unanimously approved by the
boards of directors of both GORO and Aquila. The Aquila board’s
approval of the Arrangement Agreement was based in part on the
unanimous recommendation of a special committee of independent
directors of Aquila which was appointed to consider the
Transaction. The board of Aquila has received an opinion from PI
Financial Corp. that based upon and subject to the assumptions,
limitations, and qualifications set forth therein, the
consideration to be received by Aquila shareholders pursuant to the
Transaction is fair, from a financial point of view, to Aquila
shareholders.
Advisors
Goodmans LLP is Aquila’s Canadian
legal advisor and Scotiabank and PI Financial Corp. are Aquila’s
financial advisors.
ABOUT AQUILA
Aquila Resources Inc. (TSX: AQA,
OTCQB: AQARF) is a development‐stage company focused on high grade
polymetallic projects in the Upper Midwest, USA. Aquila’s
experienced management team is currently advancing pre-construction
activities for its flagship 100%‐owned gold and zinc‐rich Back
Forty Project in Michigan.
The Back Forty Project is a
volcanogenic massive sulfide deposit with open pit and underground
potential located along the mineral‐rich Penokean Volcanic Belt in
Michigan’s Upper Peninsula. Back Forty contains approximately 1.1
million ounces of gold and 1.2 billion pounds of zinc in the
Measured & Indicated Mineral Resource classifications, with
additional exploration upside. An optimized Feasibility Study for
the Project is underway.
Additional disclosure of Aquila’s
financial statements, technical reports, material change reports,
news releases and other information can be obtained at
www.aquilaresources.com or on SEDAR at www.sedar.com.
ABOUT GOLD RESOURCE CORPORATION
Gold Resource Corporation is a gold and silver producer,
developer, and explorer with its operations centered on the Don
David Gold Mine in Oaxaca, Mexico. Under the direction of a new
board and senior leadership, the Company focus is to unlock the
significant upside potential of its existing infrastructure and
large land position surrounding the mine, to close the acquisition
of Aquila Resources Inc., and to develop the Back Forty Project in
Michigan, USA. For more information, please visit GRC’s website,
located at www.goldresourcecorp.com and read the Company’s 10-K for
an understanding of the risk factors involved.
Cautionary statement regarding
forward-looking information
This press release may contain
certain forward-looking statements. In certain cases,
forward-looking statements can be identified by the use of words
such as “plans”, “expects” or “does not anticipate”, or “believes”,
or variations of such words and phrases or statements that certain
actions, events or results “may”, “could”, “would”, “might” or
“will be taken”, “occur” or “be achieved”. In particular, this news
release contains forward-looking information pertaining to the
following: statements regarding the Transaction, including with
respect to the benefits of the Transaction and expectations
regarding the combined company (including its growth profile and
resource profile, the development of the Back Forty Project, cash
flow generation from the Don David Gold Mine, and its market
presence and re-rating potential and expectations regarding the
payment of dividends); the timing of key Transaction milestones and
closing; the ability of GORO and Aquila to satisfy the conditions
to and to complete the Transaction; and expectations regarding the
impact of the Transaction on GORO and Aquila including in respect
of anticipated financial and operating results, strategy and
business, and on stakeholders in general. Forward-looking
statements and information are subject to various known and unknown
risks and uncertainties, many of which are beyond the ability of
Aquila to control or predict, that may cause their actual results,
performance or achievements to be materially different from those
expressed or implied thereby, and are developed based on
assumptions about such risks, uncertainties and other factors set
out herein, including but not limited to: the satisfaction of the
conditions precedent to the closing of the Transaction (including
the obtaining of all shareholder, court, and regulatory approvals);
risks associated with the Transaction and acquisitions generally;
the Arrangement Agreement may be terminated in certain
circumstances; Aquila will incur costs even if the Transaction is
not completed; all necessary approvals and consents may not be
obtained; uncertainty regarding the ability of the parties to
complete all Transaction milestones on the intended timing;
inherent risks of mining exploration, development and production
operations; economic factors affecting the Company and/or GORO; the
integration of the businesses of the Company and GORO; political
conditions and the regulatory environment in the United States and
Mexico; and the scope, duration, and impact of the COVID-19
pandemic on the Company and GORO as well as the scope, duration and
impact of government action aimed at mitigating the pandemic; and
other related risks and uncertainties, including, but not limited
to, risks and uncertainties disclosed in Aquila’s filings on its
website at www.aquilaresources.com and on SEDAR at www.sedar.com.
Aquila undertakes no obligation to update forward-looking
information except as required by applicable law. Such
forward-looking information represents Aquila’s best judgment based
on information currently available. No forward-looking statement
can be guaranteed and actual future results may vary materially.
Accordingly, readers are advised not to place undue reliance on
forward-looking statements or information. Furthermore, mineral
resources that are not mineral reserves do not have demonstrated
economic viability.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211006005518/en/
Guy Le Bel, President & CEO, Director Tel: 450.582.6789
glebel@aquilaresources.com David Carew, VP Corporate Development
& IR Tel: 647.943.5677 dcarew@aquilaresources.com