{kanada_flagge}For a price of only US$1.5 million in cash and the issuance of 12.3 percent new shares, private gold producer Pilar Gold is making a surprise acquisition of the idle Laiva gold mine in Finland from the hands of creditors. Previously active only in Brazil, the acquisition doubles the company’s production capacity in one fell swoop while diversifying its geographic exposure. The Finnish project is state-of-the-art and has first-class infrastructure. It is estimated that US$300 million has been invested in the project in the past. The tax loss carryforwards alone of Otso Gold Oy, the owner company now acquired by Pilar, amount to €130 million.
{kanada_flagge}For a price of only US$1.5 million in cash and the issuance of 12.3 percent new shares, private gold producer Pilar Gold is making a surprise acquisition of the idle Laiva gold mine in Finland from the hands of creditors. Previously active only in Brazil, the acquisition doubles the company’s production capacity in one fell swoop while diversifying its geographic exposure. The Finnish project is state-of-the-art and has first-class infrastructure. It is estimated that US$300 million has been invested in the project in the past. The tax loss carryforwards alone of Otso Gold Oy, the owner company now acquired by Pilar, amount to €130 million.
Under the terms of the purchase agreement, Pilar Gold will acquire all of the shares of Otso Gold Oy for US$1.5 million in cash, a 2.5% royalty on future production from Laiva, 30 million common shares of Pilar Gold at a deemed price of C$1.00 per share and 10 million warrants of Pilar Gold at C$1.50. Concurrent with the transaction, a major global institutional investor has agreed to invest approximately C$3.1 million in the form of an equity investment in Pilar Gold at the price of C$1.00. Another round of financing is currently underway on the same terms and is expected to close by the end of this month. Subscribers to the current round of financing at C$1.00 will also receive a full warrant at C$1.50 per share. The current financing values Pilar Gold at C$250 million.
Commenting on the acquisition, Pilar CEO Jeremy Gray said, “We are confident that the team at Pilar will be able to quickly recoup their investment in the Finnish project.” Gold is expected to be produced in Finland from March next year. Laiva offers the potential for Pilar to become a major gold producer in Europe, Gray said. At the same time, Brazil remains the skin focus for Pilar, he said. Literally, Gray added, “While we remain fully focused on further growth in Brazil, the acquisition of the Laiva mine accelerates our ambition to reach 200,000 ounces of production per year. Our team in Brazil will provide strong support to our Finnish team during commissioning, and we look forward to Laiva generating significant value for Pilar Gold shareholders.” The transaction represents US$23.5 million in value to Pilar Gold shareholders, he said.
State-of-the-art mill with 6,000 tonnes per day 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 tons per day and a complete infrastructure built in 2010 at a cost of 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 leach circuits.
Total resources at the Laiva mine are currently estimated at 821,000 ounces at ~1.1 g/t, with significant potential for extensions to the ore body laterally and at depth. An estimated 3 million tonne tailings pile is also located near the mill and will provide an important source of 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 carried out by the Finnish administrator Castren and Snellman. Once the Finnish court approves the restructuring, which is expected to be in early November, Otso Gold will have a clean balance sheet.
Conclusion: For most listed gold companies, using their own shares as an acquisition currency for transactions is out of the question in the current weak environment. This is probably one of the reasons why the M&A market for gold projects has largely come to a standstill. It is precisely this weakness of the listed competition that the private gold company Pilar Gold is able to exploit and is gradually gaining a reputation in the industry as a dealmaker. Pilar has been steadily expanding its project portfolio since acquiring Equinox Gold’s eponymous Pilar mine in Brazil in April 2021. The young company has now scored a real coup with its geographic expansion into Finland. Creditors have accepted far and away Pilar shares as payment. Apparently, creditors believe that they will fare better with Pilar shares in the future than with a one-off payment in cash. However, they also have a lot of catching up to do. The fact that, on top of this, a major international investor is joining for the first time at a price of C$1.00 further attests to the quality of Pilar’s project pipeline. Operationally, the ongoing weakness of the euro and favorable energy costs in Finland should provide a tailwind for the soon-to-be debt-free Laiva project. Management has issued a near-term target of 200,000 ounces of gold production for Pilar Gold. This would make Pilar Gold a real asset to the market and (in a better stock market environment) could easily go public. The detailed presentation can be found here: Pilar Gold Investor Presentation – Laiva Mine Acquisition
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