Gran Colombia Gold Corp. (TSX: GCM; OTCQX: TPRFF) announced today
that it has entered into a letter of intent (the “LOI”) dated
effective September 23, 2020 with ESV Resources Ltd. (“ESV”) (TSXV:
ESV.H) to spin out its interest in the Zancudo Project to ESV. Gran
Colombia will also subscribe for CA$3,000,000 of subscription
receipts in a non-brokered private placement being completed
concurrently by ESV as described further below.
Serafino Iacono, Executive Chairman of Gran
Colombia, commenting on the news stated, “In light of the bullish
outlook for silver, we see the acquisition of an investment in ESV
as a tremendous opportunity to participate in a new vehicle that is
turning its attention to becoming a silver focused company looking
to offer its shareholders exposure and leverage to the precious
metal. We also see the spin out of our interest in the Zancudo
Project as an opportunity to create value for our shareholders in
this undervalued silver-gold asset. We will be providing in-country
operational expertise to ESV to advance their projects in Colombia,
including an exploration program planned for the Guia Antigua
Project following completion of the transactions and financing by
ESV.”
Zancudo Project Spin
Out
The Zancudo Project consists of a 1,052-hectare
mining concession area located in the Titiribi mining district in
Antioquia, Colombia, about 27 kilometers southwest of Medellin.
Zancudo comprises a historical silver-gold mine (the Independencia
Mine) located in the Middle Cauca Gold Belt. Gran Colombia acquired
Zancudo in 2010 and completed a 14,000 meter drilling program
carried out in 2011 and 2012.
In March 2017, Gran Colombia signed an option
agreement with IAMGOLD Corp. (“IAMGOLD”) for the exploration and
potential purchase of an interest by IAMGOLD in Zancudo. Under the
agreement, IAMGOLD was granted an option to acquire an initial
undivided 65% interest (the “First Option”) in Zancudo by incurring
an aggregate of US$10 million 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 meters of drilling at
Zancudo and has incurred over US$4 million of its exploration
commitment. However, due to COVID-19, IAMGOLD has suspended its
drilling program thus far in 2020. IAMGOLD was also granted an
additional option (the “Second Option”) to acquire a further 5%
undivided interest, for an aggregate 70% 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.
Under the terms of the spin out transaction, ESV
will issue 27,000,000 common shares to Gran Colombia in exchange
for its interest in the Zancudo Project. In addition to any escrow
restrictions imposed by the policies of the TSX Venture Exchange
(“TSXV”), all common shares issued to Gran Colombia will be subject
to a voluntary pooling arrangement from which one-quarter of the
shares will be released on each of December 28, 2020, March 27,
2021, June 27, 2021 and September 27, 2021. ESV has also agreed to
be bound by the terms of the option agreement with IAMGOLD.
ESV Private Placement
ESV has announced that it has also signed a
letter of intent with 1255269 B.C. Ltd. (the “Guia Antigua
Vendor”), a company not related to Gran Colombia or any insiders of
Gran Colombia, to concurrently acquire all of the outstanding share
capital of the Guia Antigua Vendor. The Guia Antigua Vendor owns
the Guia Antigua Project (the “Guia Antigua Transaction”) which
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 high-grade silver-gold Guía
Antigua vein which falls outside the areas associated with Gran
Colombia’s mining operations and exploration
activities.
As a condition to completing the acquisitions of
both the Zancudo and Guia Antigua Projects, ESV has announced that
it intends to complete a non-brokered private placement financing
(the “Concurrent Financing”) to raise up to $7,000,000 through the
issuance of up to 15,555,000 subscription receipts of the Guia
Antigua Vendor at a price of CA$0.45 per subscription receipt. Gran
Colombia intends to subscribe for CA$3,000,000 of the Concurrent
Financing.
The proceeds of the Concurrent Financing will be
held in escrow, pending ESV receiving all applicable regulatory
approvals and completing the Guia Antigua Transaction. Upon
satisfaction of the escrow conditions, immediately prior to
completion of the Guia Antigua 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 ESV on a one-for-one basis. If the
Guia Antigua Transaction is not completed on or before December 31,
2020, the proceeds of the Concurrent Financing will be returned to
the subscribers.
It is anticipated that ESV will change its name
to “Denarius Silver Corp.” in connection with the completion of the
aforementioned acquisitions and Concurrent Financing. In addition,
Gran Colombia will become a new “control person” of ESV and have
two nominees on the reconstituted board of directors of ESV
following the transactions. If required by the policies of the
TSXV, ESV 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 ESV prior to completion of the
acquisition transactions.
About Gran Colombia Gold
Corp.
Gran Colombia is a Canadian-based mid-tier gold
producer with its primary focus in Colombia where it is currently
the largest underground gold and silver producer with several mines
in operation at its high-grade Segovia Operations. Gran Colombia
owns approximately 57.5% of Caldas Gold Corp. (TSX-V: CGC; OTCQX:
ALLXF), a Canadian mining company currently advancing a major
expansion and modernization of its underground mining operations at
its Marmato Project in Colombia. Gran Colombia’s project pipeline
includes its Zancudo Project in Colombia together with an
approximately 20% equity interest in Gold X Mining Corp. (TSXV:
GLDX) (Guyana – Toroparu) and an approximately 26% equity interest
in Western Atlas Resources Inc. (“Western Atlas”) (TSX-V: WA)
(Nunavut – Meadowbank).
Additional information on Gran Colombia can be
found on its website at www.grancolombiagold.com and by reviewing
its profile on SEDAR at www.sedar.com.
Cautionary Statement on Forward-Looking
Information:
This news release contains "forward-looking
information", which may include, but is not limited to, statements
with respect to anticipated business plans or strategies. Often,
but not always, forward-looking statements can be identified by the
use of words such as "plans", "expects", "is expected", "budget",
"scheduled", "estimates", "forecasts", "intends", "anticipates", or
"believes" or variations (including negative variations) of such
words and phrases, or state that certain actions, events or results
"may", "could", "would", "might" or "will" be taken, occur or be
achieved. Forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual
results, performance or achievements of Gran Colombia to be
materially different from any future results, performance or
achievements expressed or implied by the forward-looking
statements. Factors that could cause actual results to differ
materially from those anticipated in these forward-looking
statements are described under the caption "Risk Factors" in the
Company's Annual Information Form dated as of March 30, 2020 which
is available for view on SEDAR at www.sedar.com. Forward-looking
statements contained herein are made as of the date of this press
release and Gran Colombia disclaims, other than as required by law,
any obligation to update any forward-looking statements whether as
a result of new information, results, future events, circumstances,
or if management's estimates or opinions should change, or
otherwise. There can be no assurance that forward-looking
statements will prove to be accurate, as actual results and future
events could differ materially from those anticipated in such
statements. Accordingly, the reader is cautioned not to place undue
reliance on forward-looking statements.
For Further Information,
Contact:Mike DaviesChief Financial Officer(416)
360-4653investorrelations@grancolombiagold.com
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