Sprott Private Resource Lending to back to-be-formed Equinox Gold

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By Ted Liu

Trek Mining Inc. (TSX-V: TREK), NewCastle Gold Ltd. (TSX: NCA) and Anfield Gold Corp. (TSX-V: ANF) have entered into a definitive agreement to combine their businesses. The combined entity intends to operate under the name Equinox Gold Corp. and expects to trade on the TSX Venture Exchange under the ticker symbol “EQX”.

Upon completion of the arrangement, former Trek Mining shareholders will own 44% of Equinox Gold, former NewCastle shareholders will own 44% and former Anfield shareholders will own 12%.

Equinox Gold will be managed by the current Trek Mining executive team and will be based in Vancouver. The operational teams for each project will remain in place. The proposed board of Directors will be led by Ross Beaty as Chairman with Christian Milau, Greg Smith, and Marcel de Groot joining from Trek Mining, Jacques McMullen and Lenard Boggio joining from NewCastle, and Marshall Koval joining from Anfield. Richard Warke, Executive Chairman of NewCastle, will continue with Equinox Gold as a strategic advisor and significant shareholder.

Subject to, and concurrent with, closing of the transaction, Ross Beaty, Anfield’s largest shareholder, will acquire approximately 22.5 million common shares of Equinox Gold, pursuant to a share and debenture purchase agreement between Trek Mining, Ross Beaty and Sandstorm Gold Ltd. (TSX: SSL) Sandstorm will sell to Ross Beaty 4.0 million common shares of Trek Mining and US $15.0 million principal of the debenture payable by Trek Mining to Sandstorm at a combined purchase price of approximately US $18.2 million. The debenture will be converted to approximately 18.5 million common shares concurrent with closing of the transaction. On closing of the transaction, Ross Beaty is expected to own approximately 11% of Equinox Gold.

Upon completion of the transaction, Equinox Gold will have approximately 423 million common shares issued and outstanding.

Sprott Private Resource Lending (Collector), L.P. has agreed to provide Trek Mining with a US $85 million senior secured credit facility to be used for construction of the Aurizona mine.

In connection with the credit facility, Sprott will be entitled to a production payment of US $20 per gold ounce on 75% of the first 400,000 ounces of gold produced from Aurizona. Further, Trek Mining will issue to Sprott 8.0 million five-year at-market common share purchase warrants.

The terms of the credit facility are not subject to technical due diligence by Sprott. The credit facility remains conditional on completion of legal and formal documentation and is expected to be completed prior to closing the transaction.

In addition to the credit facility and subject to approval by Sprott’s investment committee, Sprott has agreed to provide up to US $200 million to fund future development projects and acquisitions, which could include development of the Castle Mountain project.

Upon completion of the transaction, Equinox Gold will own 100% of two past-producing gold mines: Aurizona in Maranhão, Brazil and Castle Mountain in California, USA. A July 2017 feasibility study for Aurizona outlined the design of an open-pit gold mine producing on average approximately 136,000 ounces of gold per year with an initial 6.5-year mine life and significant exploration upside. Initial capital to fund construction and commissioning is estimated at US $130.8 million with all-in-sustaining costs estimated at US $754 per ounce. Early works construction has commenced at Aurizona and orders have been placed for long-lead items, with first gold pour planned for late 2018. At Castle Mountain, a pre-feasibility study is underway to assess a two-phase approach to resuming production before the end of 2020.

In addition to its Aurizona and Castle Mountain projects, Equinox Gold will hold an 83% interest in the Koricancha Mill, an operating gold processing facility in Peru; 100% of the Coringa project, a feasibility-stage gold project in Brazil; and 100% of the Elk Gold project, a high-grade past-producing gold project in Canada.

Combined, the gold projects have Proven & Probable gold reserves of 1.1 million ounces grading 1.71 grams per tonne (“g/t”) gold, Measured & Indicated gold resources (inclusive of reserves) estimated at 5.8 million ounces grading 0.81 g/t gold, and Inferred gold resources estimated at 2.5 million ounces grading 0.70 g/t gold.

Equinox Gold will also hold 100% of the highly prospective Warintza and Ricardo porphyry copper exploration projects in Ecuador and Chile, respectively, and 60% of the La Verde porphyry copper project in Mexico. The La Verde project has Measured & Indicated copper resources of 3.7 billion pounds grading 0.41% copper and Inferred copper resources of 2.7 billion pounds grading 0.37% copper. The Warintza project has an Inferred copper-equivalent resource of 2.1 billion pounds grading 0.61% copper-equivalent.

Anfield currently owns the Coringa gold deposit in Brazil and a financial receivable from the sale of its nickel deposit in Guatemala. Anfield is divesting both assets and will apply all sale proceeds toward the advancement of Equinox Gold’s flagship assets.

Cormark Securities Inc. has provided a fairness opinion to the Board of Directors of Trek Mining, TD Securities Inc. has provided a fairness opinion to the Board of Directors of NewCastle and Fort Capital Partners has provided a fairness opinion to the Board of Directors of Anfield. Blake, Cassels & Graydon LLP is acting as legal counsel for Trek Mining, Fasken Martineau DuMoulin LLP is acting as legal counsel for NewCastle and Borden Ladner Gervais LLP is acting as legal counsel for Anfield.

photo credit: Trek Mining Inc.