Guanajuato Silver (GSVR) - $15M Raise for Acquisition & Regional Growth

Guanajuato Silver Co. Ltd. is a Canadian mining company focused on mining and production at its El Cubo mine and mill complex. The company aims to increase its mineral resource base through the continued exploration of its El Cubo and El Pinguico projects, located 11 km from Guanajuato City in Mexico.

Guanajuato Silver Co. Ltd. announced on the 29th of June 2022, that it had signed a binding definitive acquisition agreement to acquire 100% of Great Panther Mining Ltd.’s Mexican Assets. The company will acquire the Mexican assets through the purchase of Minera Mexicana Rosario S.A. de C.V., a subsidiary of Great Panther Mining Ltd. The acquisition will see Guanajuato Silver Co. Ltd. expand its asset portfolio to three production facilities and five mines. The new assets produced approximately 2,18 million ounces of silver equivalent (AgEq) in 2021. The acquisition will consist of USD$ 8 million in cash payments towards Great Panther Mining Ltd. as well as USD$ 6.7 million in common shares of Guanajuato Silver Co. Ltd.

The company will finance the acquisition agreement through a USD$ 5 million concentrate prepayment facility term sheet undertaken with Ocean Partners UK, a metals off-take and trading firm and recently announced brokered private placement offering. The company has enlisted the services of Research Capital Corporation and Canaccord Genuity Corp. as co-lead agents and joint bookrunners to undertake a brokered private placement offering of initially 35 million subscription receipts for approximately USD$ 9 million in gross proceeds to the company. The company announced on the 7th of July 2022, that it would increase the size of the offering due to high demand to 40,3 million subscription receipts for approximately USD$ 15.3 million in gross proceeds. The subscription receipts, will upon the closing of the Minera Mexicana Rosario S.A. de C.V. acquisition automatically converts, without any further action, to one common share of Guanajuato Silver Company Ltd. and one common share purchase warrant.

Great Panther Mining operations acquisitions

Guanajuato Silver Company Ltd. announced at the end of June 2022 that it had signed a binding definitive agreement with Great Panther Mining Ltd. to acquire all of its Mexican assets. The acquisition of the assets will be performed through the acquisition of the Mexican subsidiary of Great Panther Mining Ltd., Minera Mexicana Rosario S.A. de C.V. The combined assets of Minera Mexicana Rosario S.A. de C.V. include three mines, two floatation processing facilities, a substantial resource base consisting of measured, indicated, and inferred resources and 25,000 hectares of mineral claims.

James Anderson the chairman and CEO of Guanajuato Silver Mining Company Ltd. explains that the acquisition of the assets will aid the company in its endeavours of growing and improving constantly, he states:

“I think the whole story is about us being an active, growing silver and gold producing company, and really, I like to use the word silver and gold producing business. So many of the other junior mining companies really are exploration stories, they’re drilling off an anomaly, and they’re hoping for the best. Day in, day out, we’re trying to make our business better. It’s a difficult environment to do that in, but what does that do? Well, it affords us the opportunity to buy 3 mines, and 2 production facilities, at pennies on the dollar, pennies on what they’re worth.”

The assets being purchased from Minera Mexicana Rosario S.A. de C.V are the Valencia-Cata mine and processing facility, the San Ignacio mine and the Topia mine and mill.

The Valenciana-Cata project and processing plant are situated in the centre of Guanajuato and were previously known as the Guanajuato Mine Complex. The project consists of the Guanajuatito, Valenciana, Cata, Los Posos, and Promontorio mines and is situated in the proximity of the Veta Madre mineralisation vein, a low sulfidation epithermal system mined over 600 m of vertical extent, hosting precious metal mineralisation.  

The Valenciana project has a historical measured and indicated mineral resource estimate of 251,666 tons of mineralisation at a grade of 250 g/t of silver and 1.76 g/t of gold. The inferred mineral resource estimate of the project consists of 220,760 tons of mineralisation at a grade of 225 g/t of silver and 1.95 g/ of gold. The Cata processing plant has a nameplate capacity of 1200 tons per day equating to 36,000 tons per month and consists of a traditional crushing, grinding and flotation system that produces a high-grade silver-gold concentrate.

The San Ignacio mine is located approximately 20 km west of the city of Guanajuato and 38 km from the company’s El Cubo mill. The mine has been in operation for over 10 years, with the produced ore historically transported to the Cata processing plant. Guanajuato Silver Company Ltd. instead intends to transport the mined ore to its El Cubo mill. The operation hosts a historical measured and indicated mineral resource estimate of 267,828 tons of mineralisation at a grade of 145 g/t silver and 2.80 g/t of gold. The inferred mineral resource estimate of the mine consists of 445,217 tons of mineralisation at a grade of 178 g/t of silver and 2.65 g/t of gold.

Anderson explains the company’s intent regarding the ore transportation as follows:

“San Ignacio is a mine without a processing plant. For 10 years, Great Panther has been trucking material from San Ignacio about 16 km to their processing plant almost in the middle of the city of Guanajuato and would process material there. That journey takes about 45-minutes. The journey from San Ignacio to our processing plant is a little further. It’s about 35 km. But it’s only going to take about 15 or 20-minutes longer because from where it is, we get to use the highway system on the south side of town. So, it’s a little bit of a faster journey.”

The Topia mine and mill consist of the Topia mine and its 260 tons per day flotation processing facility. The mine is a producing asset, with the processing facility running at near capacity. The mineralisation at the Topia mine consists of polymetallic epithermal veins that contain high-grade concentrations of silver, zinc, lead and gold. The mine has a historical measured and indicated mineral resource estimate of 331,800 tons at a grade of 609 g/t of silver, 1.84 g/t of gold, 4.4% lead and 4.5% zinc. The inferred mineral resource estimate of the operation consists of 274,600 tons at a grade of 592 g/t of silver, 1.44 g/t of gold, 3.35% lead and 3.63% zinc. Anderson sums up the Topia mine and mill as follows:

“Topia is currently producing 1.1 million ounces of silver equivalent per year. It was, just a couple of years ago, producing 1.8 million ounces of silver equivalent per year, and our team believes that with a little bit of capital and a little bit of tender love and care, we can move that operation back to that number. It has been in almost continuous operation since the 1940s, so there is a lot there. It can keep going on for a long, long time, but it has to be treated with some respect. So, 1.1 million ounces of silver could go to 1.8 million ounces of silver.”

The company is aiming through the acquisition of the assets to continue with its aim of consolidating the region, Anderson explains:

“Our first step in consolidating this region was to purchase El Cabo last year, so we could then have our El Pinguico project and the El Cubo mine and mill operating. From just purchasing that last April and getting it back up and going last fall, we now are making this expansion.”

Agreement financing

Guanajuato Silver Company Ltd. intends to finance the acquisition agreement through a combination of a USD$ 5 million credit facility as well as a USD$ 10.3 million brokered private placement offering.  The credit facility will be provided by Ocean Partners UK, a metals off-take and trading firm, and will consist of a concentrate prepayment facility to the value of USD$ 5 million. The concentrate prepayment facility will be for a term of 24 months and will be secured by a share pledge of the Minera Mexicana Rosario S.A. de C.V. assets. The prepayment facility will have an initial grace period of 3 months from which it will be repaid in 21 months. The prepayment facility interest will be calculated at a 12-month London interbank offered rate plus an additional 7.5%.

The brokered private placement offering initially planned to be USD$ 9 million, has been upsized by the company due to increased demand. The offering will consist of 4.3 million subscription receipts at USD$ 0.256 per subscription receipt for the total gross proceeds of USD$ 10.3 million. The subscription receipts, will upon the closing of the Minera Mexicana Rosario S.A. de C.V. acquisition automatically converts, without any further action, to one common share of Guanajuato Silver Company Ltd. and one common share purchase warrant. Anderson explains that the brokered private placement may not occur in the ideal market, but due to the value and price paid for the Minera Mexicana Rosario S.A. de C.V. assets, justified the offering. He states:

“…it’s only a good time to raise money in the market if you can use that capital to get something at a fantastic deal, and that’s what we’ve done here with the Great Panther transaction. We’re buying 2 mines that are right in Guanajuato, which will immediately complement our mining operation in Guanajuato, and then another mine a little further north in Durango, which is operating right now, which is very high grade. This will all be immediately accretive to Guanajuato shareholders.”

Future

Guanajuato Silver Company Ltd. plans to continue to grow its Mexican projects in the future with the aim being to establish itself as a mid-tier precious metals producer in Mexico.  The production profile of the company will be immediately lifted through the acquisition of the Topia Mine and processing facility, with the company further planning to restart the San Ignacio and Valenciana mines in the near future.

The Valenciana and San Ignacio mines were placed in care and maintenance due to a lack of available tailings facilities in November 2021 and January 2022 respectively. The operations will be able to restart through the transportation of the produced ore from the operations to the company’s El Cubo Mill, negating the tailings facilities constraint.

To find out more, go to the Guanajuato Silver website