Minera Alamos out with news this morning acquiring the Cerro De Oro Gold project in Zacatecas, Mexico for upfront payment of $400K cash and 2,000,000 Minera Alamos shares. This deal gives Minera another asset in the development pipeline providing the pathway to its objective of being the “Next Mid-Tier Gold Mining Company” with a goal of producing over 200,000 ounces a year. It also reinforces the value proposition of the model in which Minera is building, which is based on advancing multiple low Capex projects to production. They continue to stick to their knitting.
The payment terms are very modest relative to the potential. Management was very thoughtful about the financial component of this deal. Based on the schedule below, you can see that at closing only $400,000 in cash and 2M in shares was the upfront consideration. Moreover, they strategically sold shares of a non-core equity holding, Prime Mining, to effectively take full ownership of this asset. When all is said and done, total consideration over a 4 year period would be $2.9M in cash and 4m shares – less than 1% dilution. And the cash amounts will have effectively been paid off by the gains from the non-core equity and those cash payments are designed to stagger over a period of time when Minera is cash flowing and in production. The result, non-core equity position finances entire deal, funds the next 12-months of the expected budget, and doesn’t impact the working capital necessary for the Santana construction. That’s how you do it, folks. Accretive magic.
And if all of the above isn’t satisfactory enough, I’ll end with this quote from Darren:
“The Cerro de Oro gold project has many characteristics that mimic the El Castillo gold mine our team developed under the Castle Gold Corporation banner from 2007 until its eventual sale in 2010.” stated Darren Koningen, CEO of Minera Alamos. “Cerro de Oro contains a large disseminated gold system with a significant oxidation profile and a low implied strip ratio with the majority of mineralized areas outcropping at surface. Northern Zacatecas has a rich mining history and hosts some of the largest gold deposits in north-central Mexico. We look forward to working with the local community and Mexican mining authorities to rapidly advance permitting and establish a new mine in the district.”
An El Castillo “look-a-like.” If this turns out to be a fraction of El Castillo, I’ll be extremely happy. Congrats to Minera Alamos and team.
All the best.
Disclaimer and Disclosures:
I own the stock. Therefore, I have an inherent bias.
I am not a certified investment professional nor a geologist. Assume everything I say herein is wrong. In fact, I am wrong more often than right. Please do your own due diligence and consult with your own investment advisor. Do not buy or sell on anything contained in this write up herein. None of this is a recommendation or solicitation to buy or sell.
I did not receive any compensation for this blog post. I did not receive any compensation from the company mentioned. I did receive a Minera Alamos shirt.
The content contained herein is strictly my opinion only. I do not warrant to the accuracy of the content or whether this is a suitable investment and disclaim any responsibility.