For the price of only $1.5 million in cash and by issuing 12.3% new shares, the private gold producer Pilar Gold surprisingly acquires the idle Laiva gold mine in Finland from creditors. The company, previously active only in Brazil, doubles its production capacity at one stroke with this acquisition and simultaneously diversifies its geographical risk. The Finnish project is state-of-the-art and has first-class infrastructure. Estimates suggest that $300 million has been invested in the project in the past. The tax loss carryforwards of Otso Gold Oy, the owner company now acquired by Pilar, alone amount to 130 million euros.

According to the purchase agreement, Pilar Gold will acquire all shares of Otso Gold Oy for $1.5 million in cash, a 2.5% royalty on future production from Laiva, 30 million common shares of Pilar Gold at an assumed price of CAD 1.00 per share, and 10 million Pilar Gold warrants at CAD 1.50. Simultaneously with the transaction, a large global institutional investor has agreed to invest approximately CAD 3.1 million in the form of an equity stake in Pilar Gold at the price of CAD 1.00. A financing round on the same terms is currently ongoing and is expected to be completed by the end of this month. Subscribers to the current financing round at CAD 1.00 will additionally receive a full warrant at CAD 1.50 per share. The current financing values Pilar Gold at CAD 250 million.

Pilar CEO Jeremy Gray commented on the acquisition: “We are confident that the Pilar team will be able to quickly amortize the investment in the Finnish project.” Gold production in Finland is expected to start from March next year. Gray said that Laiva offers Pilar the potential to become a major gold producer in Europe. At the same time, Brazil remains the main focus for Pilar. Gray added verbatim: “While we remain fully focused on further growth in Brazil, the acquisition of the Laiva mine accelerates our ambitions to achieve production of 200,000 ounces per year. Our team in Brazil will actively support our Finnish team during commissioning, and we look forward to Laiva generating significant value for Pilar Gold shareholders.” The transaction represents a value of $23.5 million for Pilar Gold shareholders.

State-of-the-Art Mill with 6,000 Tonnes Daily Capacity

Otso Gold owns the fully developed and permitted Laiva gold mine in western Finland. The Laiva mine consists of two open pits and a processing plant with a capacity of 6,000 tonnes per day and complete infrastructure, which was built in 2010 for approximately 240 million euros. The state-of-the-art milling and processing plant includes crushers, autogenous and ball mills, a flash flotation concentrator, a gravity circuit with centrifugal and spiral concentrators, and high and low-grade CIL leaching circuits.

The total resources of the Laiva mine are currently estimated at 821,000 ounces with ~1.1 g/t, with considerable potential for extensions of the ore body laterally and at depth. An estimated 3 million tonne stockpile is also located near the mill and will be an important source for feed. With a medium-term production target of 80,000 ounces Au per year, the Laiva mine has the potential to more than double Pilar Gold’s current annual production.

Pilar Gold is acquiring Otso Gold OY from its Swedish parent company Otso Gold AB following a court-ordered restructuring conducted by Finnish administrator Castren and Snellman. Once the Finnish court approves the restructuring, which is expected to happen in early November, Otso Gold will have a clean balance sheet.

Conclusion: For most publicly traded gold companies, it is inadvisable to use their own shares as acquisition currency for transactions in the current weak environment. This is likely one of the reasons why the M&A market for gold projects has largely come to a standstill. The private gold company Pilar Gold can take advantage of this weakness in its listed competitors and is gradually building a reputation in the industry as a dealmaker. Since acquiring the eponymous Pilar Mine from Equinox Gold in Brazil in April 2021, Pilar has steadily expanded its project portfolio. With the geographical expansion into Finland, the young company has now achieved a real coup. The creditors have largely accepted Pilar shares as payment. Apparently, the creditors believe that they will fare better with Pilar shares in the future than with a one-time cash payment. However, they also have a lot of catching up to do. The fact that a major international investor is now investing for the first time at a price of 1.00 CAD further validates the quality of Pilar’s project pipeline. Operationally, the ongoing euro weakness and favorable energy costs in Finland should provide tailwinds for the soon-to-be debt-free Laiva Project. Management has set a near-term goal for Pilar Gold to produce 200,000 ounces of gold. This would make Pilar Gold a real asset to the market and could easily venture into an IPO (in a better stock market environment).