Axo Copper (TSXV AXO / WKN A416BY) announces a surprising acquisition! The company has entered into a definitive agreement with Osisko Development to acquire Sapuchi Minera, which owns 100% of the San Antonio Gold Project in the Mexican state of Sonora. This acquisition complements Axo Copper’s existing portfolio in Mexico with an advanced brownfield project with a defined gold resource, existing infrastructure, and a history as a producing mine!
San Antonio is located approximately 160 kilometers southeast of Hermosillo in Sonora, one of Mexico’s most important mining states, which accounts for a significant share of the country’s gold production. Historical activities date back to the 1970s, but most recently the project was operated as an open-pit mine for oxide copper from 2011 to 2018. Since the acquisition by Osisko Development in 2020, the focus has been on gold mineralization, including the processing of stockpile material, from which a total of 13,591 ounces of gold were extracted between the first quarter of 2022 and the third quarter of 2023.
Axo Copper Restructures Acquisition and Stream Partnership
The core of the transaction is the acquisition of all shares in Sapuchi Minera by Axo Copper. In return, Osisko Development receives an equity stake in Axo Copper, sized so that the company holds 9.99 percent of the outstanding Axo shares after the closing of the transaction. The recently published press release mentions 15,305,536 new Axo common shares, subject to adjustments according to the terms of the agreement. In addition, success-dependent payments are planned.
For example, Osisko Development is entitled to 70% of any Mexican VAT refunds relating to periods prior to the closing of the transaction. In addition, up to US$4 million may be due in two tranches: US$2 million each upon submission of a feasibility study to Canadian standard NI 43-101 for San Antonio and when the first gold is poured on the project. In the event of future capital increases totaling at least US$10 million, Axo Copper has agreed to allocate Osisko Development so many shares that the holding in Axo is maintained at 9.99 percent with respect to these first US$10 million.
In parallel, OR International, a subsidiary of OR Royalties Inc., will receive a 4.99 percent stake in Axo Copper for adjusting the existing stream at the San Antonio Gold Project. Here, too, the number of shares is sized so that the participation rate is achieved after closing. As with Osisko Development, OR International has the option of holding this quota through additional shares in future capital measures up to the first threshold of US$10 million. Both new shareholders have committed to subjecting their Axo shares to certain holding restrictions for twelve months and to supporting Axo Copper in selected resolutions of the general meeting in the first 24 months after completion.
With the adjusted precious metal stream, OR International will in future receive 7.15 percent of the payable gold and silver production from San Antonio. In return, Axo Copper or Sapuchi Minera pays 30 percent of the respective spot price for each delivery. In addition, the agreement provides for up to US$8.55 million in further payments, which can be made in the form of gold deliveries. These are linked to production milestones of 50,000, 100,000 and 150,000 promoted gold ounces and amount to US$2.85 million equivalent per stage.
Resource Base and Infrastructure of the San Antonio Gold Project
The basis for the gold-focused further development of the San Antonio Gold Project is an initial open-pit resource estimate, which was prepared by Micon International in accordance with NI 43-101 with a cut-off date of June 24, 2022. Across all five known deposits Sapuchi, Golfo de Oro, California, Calvario and High Life, 14.9 million tonnes of rock with an average grade of 1.20 grams of gold per tonne and 2.9 grams of silver per tonne are reported in the “indicated” category, which corresponds to 576,000 ounces of gold and 1.37 million ounces of silver. In the “inferred” category, there are an additional 16.6 million tonnes with 1.02 grams of gold per tonne and 3.3 grams of silver per tonne, corresponding to 544,000 ounces of gold and 1.76 million ounces of silver. More than 90 percent of the contained metal is attributable to the Golfo de Oro, California and Sapuchi deposits.
The resource is additionally subdivided according to weathering zones. In the area of the indicated resource, Axo Copper accounts for 2.7 million tonnes with 0.89 grams of gold per tonne and 77,000 ounces of gold on oxide material, 1.8 million tonnes with 1.02 grams of gold per tonne and 59,000 ounces on transition rock and 10.4 million tonnes with 1.31 grams of gold per tonne and 441,000 ounces on sulfide material. In the inferred category, there are 4.6 million tonnes of oxide rock with 0.74 grams of gold per tonne and 111,000 ounces of gold, 2.1 million tonnes of transition material with 0.90 grams of gold per tonne and 61,000 ounces and 9.8 million tonnes of sulfide rock with 1.18 grams of gold per tonne and 371,000 ounces. Studies suggest that the oxide zone is suitable for heap leaching with cyanide, while transition and sulfide material also show good extraction rates with crushing and tank leaching.
Metallurgical test series, including those from Forte Analytical and SGS Mineral Services, confirm gold yields of up to 80 to 90% in laboratory tests for oxide material from the Sapuchi deposit. The results for transition and sulfide material are largely consistent with older studies on Gulfo-de-Oro and California material, which indicate robust recovery rates with classic grinding and tank leaching. From Axo Copper’s point of view, this combination of an oxidic resource relatively close to the surface and deeper zones with transition and sulfide mineralization offers the possibility of technically separating different development phases from each other.
Another advantage of the San Antonio Gold Project is the existing infrastructure. The area is accessible via paved roads, has a grid power connection, approved water rights, an existing camp for up to 200 people, administrative buildings and a complete heap leaching plant including crushing circuit and carbon-in-column plant. These facilities were last used to process stockpile material and extract gold. An environmental impact assessment (MIA) had been submitted under the previous Mexican government, but was later withdrawn, so that the approval situation must be re-addressed by Axo Copper.
Significance of the Transaction and Next Steps for Axo Copper
With the acquisition of the San Antonio Gold Project, Axo Copper is expanding its portfolio in Mexico to include an advanced gold project that is already based on a resource estimate and extensive drilling data of around 85,000 drill meters, including a 27,000 meter campaign from 2021. The five identified deposits are located in a hydrothermal breccia system over a strike length of approximately 2.8 kilometers and to depths of approximately 300 meters. From the company’s point of view, San Antonio complements the existing La Huerta project and creates the basis for building an independent gold base in Sonora.
Axo Copper expects the transaction to close in the fourth quarter of 2025, subject to the approval of the TSX Venture Exchange and other regulatory authorities, as well as the fulfillment of customary closing conditions. This includes, among other things, that Axo Copper provides Sapuchi Minera with an interest-free loan to be able to meet payment obligations to the local Ejido community due before closing, provided that areas of the project are subject to communal ownership.
The completion of the transaction would anchor Osisko Development and OR International as significant shareholders in Axo Copper and place Axo Copper’s Greenfield and Brownfield activities in the gold sector of Mexico on a broader basis. Which development paths the company specifically chooses for the oxide, transition and sulfide zones of the San Antonio Gold Project will depend on future technical studies, the approval situation in Mexico and the market development for gold. It is clear that Axo Copper is taking a substantial step towards expanding its project portfolio with the acquisition of Sapuchi Minera.
