Chesapeake Gold to acquire Alderley Gold
2020-12-10 15:46 ET - News Release
Mr. Randy Reifel reports
CHESAPEAKE GOLD ANNOUNCES ACQUISITION OF ALDERLEY GOLD CORP. CREATING A PLATFORM FOR FUTURE GROWTH AND MINING INNOVATION; ALAN PANGBOURNE TO BE APPOINTED CHIEF EXECUTIVE OFFICER
Chesapeake Gold Corp. has entered into a definitive agreement on Dec. 9, 2020, to acquire Alderley Gold Corp., a private British Columbia mining technology company. With the acquisition of Alderley, Chesapeake gains access to a proven and innovative precious metals processing technology together with certain asset rights and proprietary databases, creating the path toward a new growth-oriented and innovative gold and silver producer. Chesapeake will now focus on progressing the Metates project toward production using the technology in a heap-leach operation.
Transaction highlights:
Establishes a well-capitalized, gold-silver development company: Chesapeake has a strong balance sheet with $35-million in cash to advance its flagship Metates project. Metates is a major undeveloped gold, silver and zinc deposit located in Mexico.
Developing Metates as a low-cost, scalable sulphide heap-leach mine: Preliminary test work using the technology indicates the optimal path forward for Metates would be to develop a low-capital-cost, sulphide heap-leach operation. Metallurgical test work confirms that the liberation of gold in the Metates sulphides by oxidation using certain chemistry to manage pH and alkalinity significantly improves metal recoveries during cyanide leaching.
Proven, skilled additions to Chesapeake management team and board: Alan Pangbourne and Randy Buffington bring over 60 years of experience building and operating large-scale projects throughout the Americas, as well as a proven history of developing and applying innovative processing technologies in the mining sector.
Growth through merger and acquisition: The combined team has an extensive and highly successful record of M&A and mine operational improvements.
Superior capital markets exposure: The combined team provides further access and relationships across the global mining industry, key financial institutions and a proven ability to raise capital throughout a commodity cycle, creating a strong precious metals company that can rapidly transact on value-accretive opportunities.
Randy Reifel, Chesapeake's president, commented: "I am very excited for the Alderley team to join Chesapeake as they work to demonstrate the true potential of Metates as a low-cost, sulphide heap-leach operation with a 30-year-plus mine life. We are very impressed by the Alderley team's track record of innovation in the mining space, and experience with developing and applying leading-edge processing technologies. This partnership is the first step towards building a truly innovative and successful multimine gold producer in the coming years."
Alan Pangbourne, incoming chief executive officer and director, commented: "Randy's reputation as an innovative and forward-thinking entrepreneur in Canada is well documented, with his notable successes at Francisco Gold Corp., Glamis Gold Ltd. and Goldcorp Inc. We look forward to a long and successful partnership with the Chesapeake team in implementing proven and tested oxidation technologies on Metates, as well as other future portfolio projects."
Technology
Through the acquisition of Alderley, Chesapeake gains access to Alderley's sulphide-leaching technology. The technology oxidizes sulphide and transition ores using certain chemistry to manage pH and alkalinity thereby increasing recovery and reducing potential to turn acidic during cyanide leaching. The rights to the technology are held under licence by Alderley, which requires Alderley to pay a 1-per-cent net smelter returns royalty on any future production using the technology.
Chesapeake has conducted preliminary indicative testing on several samples from the Metates project. Metallurgical test results were positive and indicate the process will promote the oxidation of the sulphides to a level that will allow the subsequent leaching and recovery of gold and silver. With the technology, the development of Metates as a heap-leach operation will not envision autoclave circuits leading to significantly lower capital and processing costs, stronger overall project economics, and a greatly reduced environmental footprint.
Management and board of directors additions
At closing, Alan Pangbourne (former CEO of Guyana Goldfields Inc.) will become CEO and a director of Chesapeake, and Randy Buffington (former CEO of Hycroft Mining Holding Corporation) will join the Chesapeake Board. Randy Reifel will continue as President and Chairman of Chesapeake's Board. Taje Dhatt will be joining Chesapeake to focus on the capital markets and advisory side of the business.
In Chesapeake, the respective title positions will be as follows:
Mr. Pangbourne, CEO and director:
Mr. Pangbourne has over 35 years of experience in mining operations and was most recently president and CEO of Guyana Goldfields Inc. through to its sale to Zijin Mining Group Co. Ltd. in August, 2020, at a 378-per-cent premium.
He was also previously chief operating officer of SSR Mining Inc., where his efforts led to over a 400-per-cent increase in annual production over five years, vice-president of projects in South America for Kinross Gold Corp. and held a number of senior roles over 15 years at BHP Billiton Ltd.
Mr. Pangbourne holds a bachelor of applied science (extractive metallurgy) and a graduate diploma in mineral processing from the Western Australian School of Mines.
Mr. Buffington, director:
Mr. Buffington has more than 28 years of experience in the mining industry and was most recently chairman, president and CEO of Hycroft Mining Holding Corp. until July, 2020.
He was previously senior vice-president of operations for Coeur d'Alene Mines Corp. and served in management roles for Barrick Gold Corp. including general manager of the Goldstrike mine.
Mr. Buffington has a masters degree in civil engineering.
Taje Dhatt, vice-president of strategy and corporate development:
Mr. Dhatt co-founded Alderley and has a decade of experience advising companies on mergers and acquisitions, stream/royalty transactions, and other corporate finance matters.
Mr. Dhatt holds a BBA from the Schulich School of Business at York University.
Transaction agreement
Under the terms of the agreement, Chesapeake will issue 10 million common shares to the shareholders of Alderley resulting in the Alderley shareholders holding approximately 14.2 per cent of the outstanding common shares of the company on a fully diluted basis. The Alderley shares will be issued into escrow with release based on time and milestone conditions over seven years as follows:
5 per cent released on each of the first four anniversaries of closing;
10 per cent released on the earlier of (a) the date of a positive feasibility study and (b) the fifth anniversary of closing;
30 per cent released on the earlier of (a) a duly certified commencement of construction of a mine and (b) the sixth anniversary of closing;
40 per cent released on the earlier of (a) a duly certified commencement of commercial production and (b) the seventh anniversary of closing.
This escrow release structure confirms the commitment of the Alderley shareholders to the future development of Chesapeake and aligns their interest in creating long-term value for all shareholders. The transaction is subject to approval of the TSX Venture Exchange
Upcoming project development and catalysts
With over $35-million in cash and marketable securities, Chesapeake is fully financed for its development programs contemplated through 2022. The company plans to complete on Metates a revised technical report and economic assessment in 2021 based on the new process route and development strategy.
As well, the company plans to conduct further metallurgical testing, update internal geo-metallurgical models, sample and confirmation drilling, rebuild its reserve and resource models for the Alderley technology, as well as to update environmental and social baseline data for permitting purposes. This development work will form the basis for an updated prefeasibility study for Metates, which would be targeted for release in early 2022.
Stock option grants
The board of directors has also granted incentive stock options to the new directors and officer for 1.85 million common shares at an exercise price of $4.56 per share. The options are exercisable for a term of five years from the date of the grant and will vest as to 25 per cent annually on each anniversary of the date of grant.
About Chesapeake Gold Corp.
Chesapeake is focused on the discovery, acquisition and development of major gold-silver deposits in North and South America. Chesapeake's flagship asset is the Metates project located in Durango, Mexico. Metates is a major undeveloped gold, silver and zinc deposit located in Mexico.
Chesapeake also has developed an organic pipeline of satellite exploration properties strategically located near Metates. In addition, the company owns 74 per cent of Gunpoint Exploration Ltd., which owns the Talapoosa gold project in Nevada.
Gary Parkison, CPG, vice president of development for Chesapeake, is the qualified person who has reviewed and approved the technical information contained in this news release.
We seek Safe Harbor.