Golden opportunity: Hochschild Mining acquires Brazil-focused firm for $105m
Hochschild Mining is boosting its portfolio with the acquisition of long-life gold asset in a mining-friendly market, following its recent political difficulties in Peru.
The mining company has reached a deal to buy Brazil-focused Amarillo Gold Corporation (Amarillo) for $105m, including a 100 per cent interest in its flagship Posse gold project in the state of Goias.
It has agreed acquire all of Amarillo’s shares in a cash offer, at the price of C$0.40 per share.
Ignacio Bustamante, chief executive officer, said: “The acquisition of Amarillo enhances the Company’s project pipeline and is the result of a long-term Company review process of a wide range of growth opportunities. Posse is an attractive low-cost project with relatively near-term production and strong exploration upside potential.”
In addition, shareholders of Amarillo will receive shares in a freshly formed company, Lavras Gold.
The new firm will hold a stake in the Lavras do Sul project in Rio Grande, alongside C$10 million of cash and two per cent net smelter revenue royalty on selected exploration properties owned by Amarillo.
The arrangement is subject to Hochschild shareholder approval, alongside approval from Amarillo shareholders, the Canadian court, regulatory authorities and the satisfaction of customary conditions.
It has been unanimously recommended by the board of directors of Amarillo and has the full support of Amarillo’s major shareholders, Baccarat Trade Investments and Eric Sprott.
The board of directors of Hochschild believes the transaction is in the best interests of Hochschild’s shareholders.
It intends to recommend unanimously that shareholders vote in favour of the agreement, with completion expected in the first quarter of 2022.
Hochschild Mining recently faced severe pressure from the Peruvian government, who looked set to close down two of its mines in the country and ban its operations, causing shares to tumble by 36 per cent earlier this month.
The government has since U-turned, and its share price has partially recovered on the FTSE 250.
Despite the good news, the company’s shares are 1.61 per cent down this morning, with Hochschild Mining trading at 128.3p.
It also faced activist pressure earlier this year, with proxy adviser Glass Lewis advising clients to reject its pay report following a death at one of its mines in Peru.