GCM Mining and Aris Gold combine to create leading Americas gold producer

Ian Telfer, Aris Gold Chair, stated: “The combined group creates a top-in-class company with multiple tier one assets. After Aris Gold became operator of the Soto Norte joint venture, joining forces with GCM became a logical next step. Our increased scale will also broaden our future opportunities to continue building a +1 million oz producer over the next few years.”

Serafino Iacono, Executive Chair of GCM, added: “Each team has unique strengths with GCM being the Colombian leader for responsible, sustainable mining practices. Together with Aris Gold's Board and management, the combined group brings a track record of building sizeable and successful mining companies; this transaction further diversifies the company’s portfolio and reaffirms Colombia as an area of focus. While I am stepping down from a day-to-day executive role, I will remain a director and advisor on matters in Colombia as well as an enthusiastic securityholder.”

Neil Woodyer, CEO of Aris Gold, concluded: “We are building a gold mining business with scale, cash flow, a strong financial position with US$397 million of cash and US$260 million of additional committed funding, and a high-quality growth pipeline. Our teams are well known to each other, and together we will optimize the delivery of the growth projects to unlock shareholder value.”

Under the terms of the transaction, all the outstanding Aris Gold shares not held by GCM will be exchanged at a ratio of 0.5 of a common share of GCM for each common share of Aris Gold (the exchange ratio). The exchange ratio was determined at-market giving consideration to the 10-day and 20-day volume weighted average prices on the TSX for each of GCM and Aris Gold for the period ended 22 July 2022. Both the GCM and Aris Gold Boards of Directors (other than certain interested directors) have approved the terms of the arrangement agreement, and all of the directors and officers of both GCM and Aris Gold have entered into binding voting support agreements in favour of the transaction, representing in aggregate 3.0% of GCM's issued shares and 9.0% of Aris Gold's issued shares.

Transaction highlights

• Creates the top-of-the-class company among junior producers and the largest gold company in Colombia, with diversification in Guyana and Canada.
• Experienced Board of Directors and management team with a track record of building value in the gold sector.
• Brings together teams with unmatched experience in Colombia and extensive project development and mine building expertise.
• Strong financial position to de-risk growth projects, with combined cash and committed funding of US$657 million and free cash flow generation from the Segovia Operations (US$84 million on a 12-month trialling basis to 31 March 2022).
• Estimated G&A cost savings of US$10 million per year through the reduction of duplicative public company expenses and rationalizing other expenses.
• No premium transaction that simplifies the ownership structure within a single company.
• Substantial long-term re-rating potential, with share price upside from enhanced market visibility, trading liquidity, access to capital, and reduced cost of capital.

Board of Directors

The Board of Directors of the resulting entity will have nine members, with Ian Telfer as Chair and Daniela Cambone, David Garofalo, Mónica de Greiff, Serafino Iacono, Peter Marrone, Hernan Martinez, Attie Roux and Neil Woodyer as members.

Mónica de Greiff is new to the Aris Gold team and is a former Board Member of GCM, from 2018 to 2020, when she left to accept the position of Colombian Ambassador to Kenya. She has held positions in both the public and private sectors, including Minister of Justice for the Republic of Colombia and Vice Minister of Mines and Energy. Ms de Greiff is a former member of the Board of Directors of the United Nations Global Compact, the world's largest corporate sustainability initiative.

Management team

The combined group will be led by Neil Woodyer as CEO and the corporate office will be based in Vancouver, Canada. Both Lombardo Paredes, CEO of GCM, and Mike Davies, CFO of GCM, will retire from their roles with GCM. Serafino Iacono will step back from an executive role but will continue as a member of the Board of Directors and an advisor on matters in Colombia.

Building a globally relevant, sustainable gold producer

The combined group will have a balanced mix of production, development, and exploration assets across the Americas with proven and probable mineral reserves of 3.8 million oz of gold (Au), measured and indicated mineral resources of 18.3 million oz Au, inclusive of mineral reserves, and inferred mineral resources of 7.7 million oz Au.

• Segovia Operations (Antioquia, Colombia): a high-grade underground mining district that produced 206 389 oz Au in 2021. Operations at Segovia have been ongoing for over 150 years and there is a well-established history of mineral resource and reserve replacement. The Segovia Operations include the purchase of mined material from small-scale miners, which are described in the Segovia Technical Report and represented about 16% of 2021’s gold production, as part of an industry-leading Colombian programme for the integration of informal small-scale miners into the supply chain, with added environmental, social and security benefits.
• Marmato Mine (Caldas, Colombia): a historic producing underground gold mine currently undergoing a modernisation and expansion programme, which includes the construction of a new decline, mine workings, 4000 tpd carbon in pulp processing plant and dry stack tailings facilities. The pre-feasibility study disclosed in the Marmato Technical Report estimates production of 175 000 oz/yr from the optimised Upper Mine and the Lower Mine expansion project.
• Toroparu Project (Cuyuni-Mazaruni, Guyana): an advanced stage opencast and underground gold project with estimated average gold production of 225 000 oz/yr over a 24-year mine life, as described in the preliminary economic assessment (PEA) disclosed in the Toroparu Technical Report. Located approximately 50 km southwest of the recently constructed Aurora gold mine, Toroparu is one of the largest undeveloped gold projects in the Americas and provides the combined company with a foothold in the emerging and highly prospective Central Guiana Shear Zone.
• Soto Norte Project (Santander, Colombia): a large-scale feasibility-stage underground gold project undergoing permitting and licensing. In April 2022, Aris Gold became the operator of the Soto Note joint venture and is leading a new and reframed environmental permitting process. The feasibility study disclosed in the Soto Norte Technical Report estimates average gold production of 450,000 oz/yr over the steady state production years. Upon exercising its option to increase its joint venture ownership interest from 20% to 50%, the attributable gold production to Aris Gold would be 225 000 oz/yr.
• Juby Project (Ontario, Canada): an advanced stage gold project with an opencast mineral resource located in the Abitibi greenstone belt.

While the combined company embarks on delivering its growth projects, the Board of Directors of the combined company is expected to initially adopt a no-dividend policy based on the strategic principle that internal cash flow generation is best deployed to advance high-return growth opportunities within the company.

Terms of the transaction

On closing, GCM shareholders and Aris Gold shareholders (taking into consideration the 44.3% of Aris Gold currently held by GCM) are expected to own, on a diluted in-the-money basis, approximately 74% and 26% of the combined group, respectively.

The arrangement agreement includes customary transaction protection terms. GCM and Aris Gold have agreed to not solicit any alternative transactions and each party has the right to match any superior competing offer, with a reciprocal transaction termination fee of US$6 million to be paid in certain circumstances.

The material conditions to completion of the transaction include:

• Approval by Aris Gold's shareholders, with greater than 66 2/3% approval threshold and approval of disinterested minority shareholders.
• Approval by GCM's shareholders, with greater than 50% approval threshold.
• Receipt of all required governmental and regulatory approvals including TSX and Colombian anti-trust approvals.
• Other customary conditions.

It is anticipated that both the GCM and Aris Gold shareholder meetings will take place in mid September 2022, and completion of the transaction is expected to occur promptly thereafter.

Read the article online at: https://www.globalminingreview.com/finance-business/27072022/gcm-mining-and-aris-gold-combine-to-create-leading-americas-gold-producer/