Aurcana Corporation (TSX-V: AUN)
(“
Aurcana” or the
“
Company”) is pleased to announce
a series of transactions to enable the Company’s plan to become a
multi-asset mid-tier silver producer. The Company will announce its
funding approach in the near future and is already in discussions
with potential equity partners and non-dilutive capital providers.
All dollars herein are in United States Dollars
unless otherwise noted.
1) Material
Acquisition and Reverse Take
Over:
Aurcana has entered into a letter of intent
dated July 27, 2018 (the “LOI”)
with certain wholly owned investment vehicles controlled by Lascaux
Resource Capital Fund I LP (collectively, the “LRC
Group”) pursuant to which Aurcana will effect a
business combination and reverse takeover transaction that will
result in, among other things, Aurcana acquiring all of the issued
and outstanding shares of common stock of Ouray Silver Mines, Inc.
a corporation incorporated under the laws of Colorado
(“Ouray” and together with the
LRC Group, the “OSM Group”) on a
debt free basis in exchange for newly issued common shares of
Aurcana (collectively, the “Proposed
Transaction”). Ouray is a private company wholly
owned by the LRC Group. The OSM Group is at arm’s length to Aurcana
and owns 100% of the Revenue-Virginius Mine (“RV
Mine”) in Ouray, Colorado which is a fully
permitted past producing (last production 2015) polymetallic
deposit that derives the majority of its revenue from silver. In
June 2018, SRK Consulting (U.S.), Inc.
(“SRK”) completed a feasibility
study (the “RV Mine
FS”) in compliance with National
Instrument 43-101 – Standards of Disclosure for Mineral Projects
(“NI 43-101”) of the Canadian
Securities Administrators on the RV Mine demonstrating a Base Case1
After-Tax Net Present Value using a 5% discount rate
(“NPV5”) of $74.9 million and an
After-Tax Internal Rate of Return
(“IRR”) of 71.2%. In connection
with the Proposed Transaction, Aurcana also intends to complete an
offering of subscription receipts to raise gross proceeds of not
less than C$10 million (the
“Offering”) to close concurrent
with the Proposed Transaction. Terms and the ultimate size of the
Offering will be announced at a later date. The Proposed
Transaction has the support of the Board of Directors of Aurcana,
as well as Orion Mine Finance
(“Orion”), the largest (15%)
shareholder of Aurcana, and Orion and each of the directors and
senior officers of Aurcana have executed support agreements in
favor of the Proposed Transaction. The Proposed Transaction is
contemplated to be completed by a Plan of Arrangement pursuant to
the Business Corporations Act (British Columbia) (the
“Plan”). The Parties target
closing the Proposed Transaction in early November.
2) Equipment
Purchase Agreement:
Aurcana has entered into a purchase agreement
(the “Equipment Purchase
Agreement”) with entities controlled by Orion to
purchase equipment owned by the Orion entities and that remains
located at Aurcana’s wholly owned oxide silver Shafter-Presidio
Mine (the “SP Mine”) in
Texas. The consideration paid under the Equipment Purchase
Agreement will total $4.5 million, of which $500,000 will be paid
in cash and the remainder of which will be paid by the issuance of
23,894,535 pre-Share Consolidation Aurcana Shares (see definition
herein), which will be issued to Orion under the Plan of
Arrangement. This Equipment Purchase Agreement is anticipated to
reduce the overall capital cost of placing the SP Mine into
production.
3) Updated PEA
for the SP Mine:
Aurcana has received results of an updated PEA
for the SP Mine based on the Company’s current mineral resource
estimate, as disclosed in the Company’s news release dated January
12, 2016 (the “Resource
Estimate”). The Resource Estimate was combined
with an updated capital cost (in part based on the Equipment
Purchase Agreement), updated operating cost, and an optimized mine
plan. The updated PEA demonstrates a Base Case2 After-Tax NPV5 of
$15.9 million and an After-Tax IRR of 38.1%. The PEA is preliminary
in nature and includes inferred mineral resources that are
considered too speculative geologically to have the economic
considerations applied to them that would enable them to be
categorized as mineral reserves, and there is no certainty that the
economic results described in the PEA will be realized.
Aurcana’s President and CEO Kevin Drover states
“As many of our shareholders know we have been very active over the
past few years evaluating opportunities to enhance shareholder
value. This proposed transaction with Ouray represents an excellent
opportunity for Aurcana to finally realize on this goal and is, in
my opinion, a transformative transaction for the company that will
propel Aurcana once again into a mid-tier status as a silver
producer.”
Elliot Rothstein and David Kaplan, co-managers
of the LRC Group, stated: “We are extremely pleased to have
been able to partner the OSM Group and our team at Ouray with Kevin
Drover and the Shafter-Presidio mine. We see synergies in the
assets and in the people, and we look forward to partnering with
Aurcana to take the Revenue-Virginius project into production and
provide a platform for future growth with the Shafter-Presidio
mine.”
Material Acquisition and Reverse
Take Over
About Ouray Silver
Mines
Ouray owns a 100% interest in the RV Mine
located in Ouray, Colorado.
The RV Mine is a fully permitted past producing
(last production 2015) polymetallic deposit that derives the
majority of its revenue from silver. In June 2018, SRK completed
the RV Mine FS, a NI 43-101 feasibility study on the RV Mine,
demonstrating a Base Case3 After-Tax (NPV5) of $74.9 million and an
After-Tax IRR of 71.2%.
The RV Mine FS outlines a restart plan for the
RV Mine that requires approximately $36.8 million of initial
capital (including working capital, contingency and concentrate
payment terms). First production is scheduled in month 7 from the
project start date, and positive cash flow occurs in month 9.
The project is break even in month 16 after the commencement of
production (23 months from the project start date) and will produce
roughly 18 million payable silver equivalent (“Ag
Equivalent” or “Ag
Equiv.”) ounces at an all in sustaining Ag
Equivalent cost of $11.01 per Ag Equivalent ounce over the current
6.4 year mine life based on the currently defined mineral reserves
($10.71 per Ag Equivalent ounce over the first 5 years). The
defined mineral reserve has 575,000 short tons at an Ag Equivalent
grade of 39.9 ounces/short ton (1,264 grams/metric ton). The
restart plan initially focuses on higher grade and accordingly the
production is front loaded, with the first 5 years of production
producing 15.5 million payable Ag Equivalent ounces (3.1 million /
year).
Table 1 below shows the mineral reserves and
resources of the RV Mine.
Table 1: RV Mine Mineral
Reserves and Resources
Mineral Resources:
|
Tons |
Ag |
Au |
Pb |
Zn |
Ag |
Au |
Pb |
Zn |
|
Ag Equiv |
Ag Equiv |
Classification |
(kst) |
(oz/st) |
(oz/st) |
(%) |
(%) |
(koz) |
(koz) |
(klb) |
(klb) |
|
(koz) |
(oz/st) |
Measured |
315 |
23.1 |
0.06 |
4.86 |
1.92 |
7,273 |
19 |
30,634 |
12,093 |
|
11,048 |
35.1 |
Indicated |
672 |
18.1 |
0.05 |
3.74 |
2.00 |
12,135 |
32 |
50,230 |
26,879 |
|
18,842 |
28.0 |
Total M&I |
987 |
19.7 |
0.05 |
4.10 |
1.97 |
19,408 |
51 |
80,864 |
38,972 |
|
29,891 |
30.3 |
Inferred |
331 |
27.2 |
0.07 |
4.61 |
2.35 |
8,996 |
22 |
30,529 |
15,542 |
|
13,200 |
39.9 |
Mineral Reserves:
|
Tons |
Ag |
Au |
Pb |
Zn |
Ag |
Au |
Pb |
Zn |
|
Ag Equiv |
Ag Equiv |
Classification |
(kst) |
(oz/st) |
(oz/st) |
(%) |
(%) |
(koz) |
(koz) |
(klb) |
(klb) |
|
(koz) |
(oz/st) |
Proven |
244 |
23.75 |
0.06 |
4.94 |
1.84 |
5,805 |
15 |
24,153 |
9,011 |
|
8,729 |
35.7 |
Probable |
331 |
25.39 |
0.05 |
4.99 |
2.37 |
8,397 |
18 |
32,985 |
15,696 |
|
12,472 |
37.7 |
Total P+P |
575 |
24.70 |
0.06 |
4.97 |
2.15 |
14,202 |
33 |
57,138 |
24,707 |
|
21,201 |
36.9 |
Notes:
(1) |
Based on the
RV Mine FS prepared by SRK and Ouray analysis. The effective date
of the mineral reserve and resource estimates in the RV Mine FS is
June 15, 2018. |
(2) |
Notes for
mineral resources: (i) mineral resources are not mineral reserves
and do not have demonstrated economic viability. There is no
certainty that all or any part of the mineral resources estimated
will be converted into mineral reserves. Mineral resources
inclusive of mineral reserves; (ii) mineral resource tonnage and
contained metal have been rounded to reflect the accuracy of the
estimate, and numbers may not add due to rounding; (iii) all
measured and indicated mineral resource estimates with the defined
wireframes are considered to have potential for economic extraction
as entire level will be mined; (iv) inferred mineral resources are
limited using a net smelter return (“NSR”) cut-off
US$200/st; (v) metal price assumptions considered for the
calculation of metal equivalent grades are: Gold (US$/oz 1,300),
Silver (US$/oz 18.50), Lead (US$/lb 1.00) and Zinc (US$/lb 1.20).
Metal equivalent calculation excludes copper; (vi) cut-off
calculations assume average metallurgical recoveries equal to: Gold
(65%), Silver (96%), Lead (96%), Copper (94%) and Zinc (89%); and
(vii) the mineral resources were estimated by Benjamin Parsons,
BSc, MSc Geology, MAusIMM (CP) #222568 of SRK, a qualified person
within the meaning of NI 43-101. |
(3) |
Notes for
mineral reserves: (i) all figures are rounded to reflect the
relative accuracy of the estimates. Totals may not sum due to
rounding; (ii) mineral reserves are reported at NSR CoGs based on
metal price assumptions, metallurgical recovery assumptions, mining
costs, processing costs, general and administrative (G&A)
costs, and treatment and refining charges. Mining costs, processing
costs, and G&A costs total US$240.62/st. Metal price
assumptions considered for the calculation of metal equivalent
grades are: Gold (US$/oz 1,300), Silver (US$/oz 18.50), Lead
(US$/lb 1.00) and Zinc (US$/lb 1.20); Metallurgical recoveries for
payable items in the Pb concentrate are: Gold (60%), Silver (95%),
and Lead (95%). Metallurgical recoveries for payable items in the
Zn concentrate are: Zinc (54%); (iii) mineral reserves have been
stated on the basis of a mine design, mine plan, and cash-flow
model. Full mining recovery of designed areas is assumed. Mining
dilution is applied at zero grade and ranges from 5.9%-26.8%. 4)
The mineral reserves were estimated by Ouray. Joanna Poeck, (BS
Mining, MMSA, SME-RM) of SRK, a qualified person within the meaning
of NI 43-101, reviewed and audited the mineral reserve
estimates. |
(4) |
There are no
known legal, political, environmental, or other risks that could
materially affect the potential development of the mineral
resources or mineral reserves described in the RV Mine FS. For
additional information on legal, political, environmental and other
factors considered in respect of the RV Mine FS, readers are
encouraged to refer to the full text of the RV Mine FS which will
be filed in connection with the Proposed Transaction. |
Table 2 provides a summary of the capital cost
estimates for the RV Mine described in the RV Mine FS.
Table 2: RV Mine Capital Cost
Estimates
Description |
Construction |
Ramp Up |
Total Initial Capital |
Sustaining Capital |
Total LOM Capital |
Revenue MineRevenue Mill Surface Site
InfrastructureEngineering & Construction Contracts |
($3,207)($3,899)($910)($712)($14,522) |
($383)($124)$0$0($1,463) |
($3,590)($4,023)($910)($712)($15,894) |
($301)($94)($222)($179)($6,837) |
($3,890)($4,117)($1,132)($891)($22,821) |
SubtotalPre-Production Costs |
($23,250)($6,982) |
($1,970)$0 |
($25,219)($6,982) |
($7,632)$0 |
($32,852)($6,982) |
SubtotalContingency |
($30,232)($1,899) |
($1,970)($172) |
($32,202)($2,060) |
($7,632)($723) |
($39,834)($2,784) |
Total Capital Operating Costs During
Ramp UpNet Revenue During Ramp Up |
($32,121) |
($2,141)($2,838)$306 |
($34,262)($2,838)$306 |
($8,356) |
($42,618) |
Total Net Capital and Start Up
Costs |
($32,121) |
($4,673) |
($36,794) |
|
|
Table 3 provides a summary of the operating cost
estimates for the RV Mine described in the RV Mine FS.
Table 3: RV Mine Operating Cost
Estimates
Revenue Mine
Operating Costs |
LOM |
First Five Years |
US$000’s |
US$/st RoM |
US$000’s |
US$/st RoM |
Revenue MiningRevenue MillingG&ASurface Operating
Costs |
$54,895$29,291$53,530$6,671 |
$95$51$93$12 |
$47,990$23,796$41,894$5,383 |
$103$51$90$12 |
Total Operating Costs |
$144,387 |
$251 |
$199,062 |
$254 |
For the past two years Ouray has been under the
direction of CEO Brian Briggs and a core team who will join
Aurcana. Mr. Briggs will remain the CEO of Ouray following
the completion of the Proposed Transaction and will report directly
to Kevin Drover, President and CEO of Aurcana.
In connection with the RV Mine FS, SRK verified
sampling, analytical, and test data underlying the information or
opinions contained in the RV Mine FS. In particular, SRK reviewed
10% of the database of both historical and new data against assay
certificates and found less than 2% error in the database. No major
changes were made to the assay database except where Ouray
geologists averaged samples that had multiple assays. SRK also
completed a detailed review of the historical logging to gain more
geological information and a statistical review of the channel and
drilling database which supports the use of both the chip and
drilling samples. SRK is of the opinion that no material bias is
being introduced by using the database as presented by Ouray and
that it is adequate for use in the geological modelling and mineral
resource estimation. Additional information concerning data
verification is contained in the RV Mine FS.
Additional information concerning the RV Mine is
contained in the RV Mine FS which will be made available on
Aurcana’s SEDAR profile at www.sedar.com in connection with the
Proposed Transaction. Technical information in this press
release regarding Ouray and the RV Mine has been approved by Jeff
Osborn of SRK, who is a qualified person as defined by NI 43-101
and independent of Aurcana and Ouray.
Financial information with respect to Ouray will
be disclosed in the management information circular of Aurcana
(“Circular”) to be filed in
connection with Aurcana shareholder approval of the Proposed
Transaction.
Table 4 below shows the highlights of the pro-forma Company upon
completion of the Proposed Transaction.
Table 4: Key Statistics and Technical Study
Highlights for SP Mine and RV Mine4
|
Units |
AUN |
OSM |
AUN+OSM |
|
|
|
|
|
Study Phase |
|
PEA |
DFS |
|
|
|
|
|
|
P&P Reserves |
M Ag Equiv
Oz |
|
21.2 |
21.2 |
Ag Equivalent |
Oz/st |
|
36.9 |
36.9 |
|
|
|
|
|
M&I Resources |
M Ag Equiv
Oz |
11.1 |
29.9 |
40.9 |
Ag Equivalent |
Oz/st |
9.1 |
30.3 |
24.6 |
|
|
|
|
|
Inferred Resources |
M Ag Equiv
Oz |
6.5 |
13.2 |
19.7 |
Ag Equivalent |
Oz/st |
7.5 |
39.9 |
29.2 |
|
|
|
|
|
Avg Annual Production |
M Ag Equiv
Oz |
1.61 |
3.12 |
4.8 |
AISC3 |
$/Ag Equiv
Oz |
$11.015 |
$10.716 |
$10.81 |
|
|
|
|
|
Capital Required |
$ M |
$20.6 |
$36.8 |
$57.4 |
After-Tax NPV5 |
$ M |
$15.8 |
$74.9 |
$90.8 |
After-Tax IRR |
% |
37.0% |
71.2% |
|
Technical reports supporting the SP Mine PEA and RV Mine FS will
be filed on SEDAR within 45 days.
Summary of the Proposed
Transaction
Under the LOI, the parties have agreed to
diligently and in good faith negotiate a definitive agreement (the
“Definitive Agreement”) that will
provide the basis upon which the parties will complete the Proposed
Transaction in compliance with the policies of the TSX Venture
Exchange (the “Exchange”). The
Proposed Transaction will be effected by way of a court approved
plan of arrangement under the Business Corporations Act (British
Columbia). As of the date hereof, Aurcana currently has 109,989,387
common shares (each, an “Aurcana
Share”) issued and outstanding. Pursuant to the
terms of the Proposed Transaction:
- Aurcana will complete a share
consolidation (the “Share
Consolidation”) on a 5:1 basis (resulting in
approximately 21,997,877 outstanding Aurcana Shares);
- Aurcana will complete the purchase
of all equipment currently owned by an entity controlled by
Orion and currently located at
Aurcana’s Shafter project (the “Shafter Equipment
Purchase”) in exchange for $500,000 and 4,778,909
post-Share Consolidation Aurcana Shares; and
- Following completion of the Share
Consolidation and Shafter Equipment Purchase, Aurcana will then,
via a wholly-owned newly formed United States subsidiary, acquire
all of the issued and outstanding shares of common stock of Ouray
and a related amended and restated metal prepay agreement between
Ouray and an investment fund controlled by the LRC Group (the
“PFA”) in exchange for 83,240,359
post-Share Consolidation Aurcana Shares, and Ouray will become a
subsidiary of Aurcana.
The Aurcana Shares issuable pursuant to the
Proposed Transaction will be freely trading common shares of
Aurcana, subject to any escrow provisions pursuant to requirements
of the Exchange and any trading restrictions under applicable
securities laws. Following completion of the Proposed
Transaction, but prior to giving effect to the Offering, the LRC
Group and the then current Aurcana shareholders will hold
approximately 75% and 25% respectively of Aurcana.
As of the date of this press release, an
affiliate of Orion owns 16,499,501 Aurcana Shares (representing
approximately 15% of the current issued and outstanding Aurcana
Shares) and, the Proposed Transaction is a “business combination”
for purposes of Multilateral Instrument 61-101 - Protection of
Minority Security Holders in Special Transactions
(“MI 61-101”). Orion has
entered into a customary voting support agreement with Aurcana
pursuant to which it has agreed to vote its shares in favour of the
Proposed Transaction in any shareholder vote in respect of which it
is permitted to vote. All of the directors and officers of
Aurcana have also entered into customary voting and support
agreements to vote in favour of the Proposed Transaction.
Completion of the Proposed Transaction is
subject to a number of conditions, including among other things:
(a) receipt of a favourable vote of at least (i) 66 2/3% of the
shares voted by holders of Aurcana at the meeting and (ii) a simple
majority of the votes cast by disinterested shareholders of
Aurcana, voted at a special meeting of shareholders expected to be
held in late October or early November 2018; (b) approval of the
Exchange; and (c) standard closing conditions, including the
conditions described below. The Proposed Transaction will
constitute a Reverse Takeover of Aurcana pursuant to Policy 5.2 –
Changes of Business and Reverse Takeovers of the Exchange. Upon
completion of the Proposed Transaction, Aurcana will continue on
with the business of Aurcana and remain a Tier 1 mining issuer,
with Ouray as its principal operating subsidiary (the Company after
the completion of the Proposed Transaction being referred to herein
as the “Resulting Issuer”).
The Circular in connection with a special
meeting of the shareholders of Aurcana to approve the Proposed
Transaction will be prepared and filed on SEDAR at www.sedar.com in
accordance with the policies of the Exchange and applicable
Canadian securities laws. A press release will be issued by Aurcana
once the Circular has been filed.
The parties have agreed that during the period
ending on the earlier of December 31, 2018 and the date upon which
the either of the parties advises the other party that it has
received a “Superior Proposal” to the Proposed Transaction, the
parties will deal exclusively with each other in connection with
the Proposed Transaction. If, during such exclusivity period
or before a date which is three (3) months from the end of such
exclusivity period, a party that terminates the LOI enters a
transaction involving a “Superior Proposal”, such terminating party
shall pay the other party a cash break fee equal to $1,000,000. If
the Proposed Transaction is not completed, each of the parties will
bear their own respective costs and expenses associated with the
Proposed Transaction (excluding the preparation of the Circular,
the costs of which shall be split equally between the parties in
such case). If the Proposed Transaction is completed, the Resulting
Issuer will pay all reasonable costs of the parties in relation to
the Proposed Transaction.
The shares of the Company were halted effective
prior to the market open July 30, 2018 and will remain halted until
the completion of the Proposed Transaction.
Conditions to the Proposed
Transaction
The closing of the Proposed Transaction will be
subject to the following mutual conditions precedent, among
others:
- the execution of the Definitive
Agreement;
- the completion of the
Offering;
- the receipt of all necessary
regulatory, corporate and third party approvals, including the
approval of the Exchange for the Proposed Transaction, the
requisite approval of the shareholders of Aurcana and the
investment committee of the LRC Group and compliance with all
applicable regulatory requirements and conditions in connection
with the Proposed Transaction;
- compliance by Aurcana with the
listing requirements of the Exchange;
- the confirmation of the
representations and warranties of each party to the Definitive
Agreement as set out in such agreement;
- the absence of any material adverse
effect on the financial and operational condition or the assets of
each of the parties to the Definitive Agreement;
- the delivery of standard completion
documentation including, but not limited to, customary legal
opinions from legal counsel, officers’ certificates and
certificates of good standing or compliance; and
- the delivery of letters of
resignation of all directors and officers of Ouray and Aurcana that
will not be continuing in their positions post-Proposed
Transaction, conditional upon the completion of the Proposed
Transaction and reciprocal releases of such individuals in
connection therewith; and
- other condition precedents
customary for a transaction such as the Proposed Transaction.
The completion of the Proposed Transaction is
also subject to the following conditions precedent in favour of the
OSM Group:
- at closing, other than as agreed
between the parties, Aurcana will have no liabilities or
obligations (contingent or otherwise) inclusive of liabilities
relating to the fees and disbursements of its counsel appointed in
connection with this Proposed Transaction;
- other than as agreed between the
parties, the termination of all agreements involving Aurcana
relating to administration or leases without any further liability
to Aurcana after the closing of the Proposed Transaction; and
- at closing, Aurcana will have cash
of not less than C$2,000,000 (net of expenses relating to the
completion of the Proposed Transaction incurred by Aurcana, which
shall not exceed such amount).
The completion of the Proposed Transaction is
also subject to the following conditions precedent in favour of
Aurcana:
- at closing, Ouray will have no
liabilities or obligations that have not been transferred to the
benefit of Aurcana (contingent or otherwise) inclusive of
liabilities relating to (x) the PFA, and (y) the fees and
disbursements of its counsel appointed in connection with the
Proposed Transaction.
The parties will be seeking a waiver from the
Exchange of any requirement for a sponsor, but in the event a
waiver is not available, will seek a sponsorship relationship for
this Proposed Transaction with an Exchange member firm.
Closing of the Proposed Transaction shall occur
on the day which is the tenth business day following the
satisfaction or waiver of the conditions precedent (other than
those conditions precedent to be completed concurrent with the
closing) or such other date as mutually agreed to by the parties,
but in any event no later than December 31, 2018, or such extended
date as mutually agreed by the parties in writing.
The Resulting Issuer – Summary
of Proposed Directors and Officers
Upon completion of the Proposed Transaction,
each of the current directors of Aurcana will resign and a new
board of directors of Aurcana (the
“Board”) will be reconstituted
and comprised of five directors, subject to the policies of the
Exchange and Canadian securities and corporate laws. The LRC
Group will have the right to nominate three (3) of the five
directors. The other two board seats will be open to the CEO of
Aurcana and a nominee of Orion Mine Finance. Additional information
concerning the individuals to be appointed to the Board will be set
forth in the Circular.
On closing of the Proposed Transaction, Aurcana
will enter into a customary investors agreement with the LRC Group,
which agreement will memorialize, among other things, the foregoing
rights of Board representation, and which shall be subject to
customary sunset provisions, which shall be determined in
definitive documentation, based on reductions in the LRC Group’s
shareholdings of Aurcana.
The parties anticipate that the current senior
management of both Aurcana and Ouray will continue in their current
respective capacities following completion of the Proposed
Transaction.
Corporate
Governance
On May 28, 2018, the Board of Directors of
Aurcana formed a special committee (the “Special
Committee”), consisting of members of the Board
of Directors of Aurcana who are independent of management, and who
have no direct or indirect interest in any of the transactions
contemplated by the Proposed Transaction, including the Shafter
Equipment Purchase, to consider the planned Proposed Transaction.
The Special Committee met on numerous occasions and oversaw the
negotiations in respect of the Proposed Transaction and the Shafter
Equipment Purchase.
After considering the terms of the Proposed
Transaction, including the Shafter Equipment Purchase, and having
regard to the alternatives available to the Company, the financial
position of the Company, as well as certain advice and opinions it
received from the Company’s management, the Special Committee
concluded that the Proposed Transaction, including the Shafter
Equipment Purchase, is in the best interests of the Company and
unanimously recommended that the Board approve the LOI. After
receipt of the recommendation by the Special Committee, the Board
determined that the Proposed Transaction and the Shafter Equipment
Purchase are in the Company's best interests, and unanimously
approved the LOI.
Further
Information
All information contained in this press release
with respect to Aurcana and the OSM Group was supplied by the
parties, respectively, for inclusion herein, and Aurcana and its
directors and officers have relied on the OSM Group for any
information concerning such party, including information concerning
the Revenue-Virginius Project.
Completion of the Proposed
Transaction is subject to a number of conditions, including but not
limited to, Exchange acceptance. The Proposed Transaction cannot
close until the required shareholder approval is obtained. There
can be no assurance that the Proposed Transaction will be completed
as proposed or at all.
Investors are cautioned that,
except as disclosed in the Circular to be prepared in connection
with the Proposed Transaction, any information released or received
with respect to the Proposed Transaction may not be accurate or
complete and should not be relied upon. The Exchange has in no way
passed upon the merits of the Proposed Transaction and has neither
approved nor disapproved the contents of this press
release.
Neither the Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the Exchange) accepts responsibility for the adequacy
or accuracy of this release.
This press release does not
constitute and the subject matter hereof is not, an offer for sale
or a solicitation of an offer to buy, in the United States or to
any "U.S. Person" (as such term is defined in Regulation S under
the U.S. Securities Act of 1933, as amended (the "1933 Act")) of
any equity or other securities of Aurcana or Ouray. The securities
of the Resulting Issuer to be issued in connection with the
Offering have not been registered under the 1933 Act and may not be
offered or sold in the United States (or to a U.S. Person) absent
registration under the 1933 Act or an applicable exemption from the
registration requirements of the 1933 Act.
Equipment Purchase
Agreement
Aurcana has entered in the Equipment Purchase
Agreement with entities controlled by Orion to purchase equipment
owned by the Orion entities and that remains located at the SP
Mine. The consideration paid under the Equipment Purchase
Agreement will total $4.5 million, of which $500,000 will be paid
in cash (the “Cash Proceeds”) and
the remainder of which will be paid by the issuance of 23,894,535
pre-Share Consolidation Aurcana Shares, which will be issued to
Orion under the Plan of Arrangement. Pursuant to the terms of
the Equipment Purchase Agreement, Orion has agreed to use the
aggregate amount of the Cash Proceeds to subscribe for subscription
receipts in the Offering. The Equipment Purchase Agreement is
anticipated to reduce the overall capital cost of placing the SP
Mine into production.
The completion of the Shafter Equipment Purchase
is subject to, among other things, the following conditions
precedent in favour of Aurcana:
- the receipt of all necessary
regulatory, corporate and third party approvals, including the
approval of the Exchange and the requisite approval of the
shareholders of Aurcana; and
- the concurrent closing of the
Shafter Equipment Purchase and Proposed Transaction.
Pursuant to MI 61-101, the Shafter Equipment
Purchase will constitute a related party transaction, and therefore
certain shareholder approval and valuation requirements would apply
to such transactions, unless an exemption is available therefrom
under the terms of MI 61-101. Section 4.4(1)(a) of MI 61-101
provides for an exemption from the formal valuation requirement of
MI 61-101 where an issuer’s securities are not listed or quoted on
a specified market. The shares of Aurcana are not listed or quoted
on a specified market for purposes of MI 61-101 and therefore the
Shafter Equipment Purchase is exempt from the formal valuation
requirements. To the knowledge of the directors and officers of
Aurcana, after reasonable enquiry, there have been no prior
valuations (as defined in MI 61-101) prepared in respect of the
equipment in connection with the Shafter Equipment Purchase within
the 24 months preceding the date of this press release.
Additionally, Aurcana intends to obtain the approval of the
majority of the minority of its shareholders in connection with the
Shafter Equipment Purchase at the Special Meeting. In particular,
Orion and any other interested party will be excluded from voting
their Aurcana Shares in connection with the approval of the Shafter
Equipment Purchase.
As of the date of this press release, an
affiliate of Orion owns 16,499,501 pre-Share Consolidation Aurcana
Shares (representing approximately 15% of the current issued and
outstanding Aurcana Shares). Following the completion of the
Shafter Equipment Purchase and the completion of the Proposed
Transaction, but prior to the completion of the Offering, Orion
will hold approximately 8,078,809 post-Share Consolidation Aurcana
Shares (representing approximately 7% of the then-outstanding
Aurcana Shares).
Updated PEA for the SP
Mine
The PEA incorporates the results of the
Company’s current mineral resource estimate, as disclosed in the
Company’s news release dated January 12, 2016 (the
“Resource Estimate”). The PEA is
based on reopening the existing Aurcana underground access ramp,
recommissioning of the milling operation at 600 tons per day
(“TPD”) utilizing the existing
silver recovery process. This approach will focus on higher-grade
mineralization and improved silver recovery.
Kevin Drover, President & CEO of Aurcana
noted, “The new mine plan developed for this PEA has improved the
pre-tax economics of the Project. It provides a solid foundation
for advancing the Project to the next stages of development. The
fully permitted Shafter-Presidio Mine is ideally poised in terms of
project economics, with existing underground development, a mill
and established infrastructure.”
All currencies in the PEA section are expressed
in US Dollars unless otherwise noted.
PEA HIGHLIGHTS:
- Base Case* after-tax NPV5 of $15.8 million, IRR of 37.0%.
- Initial capital costs of approximately $20.6 million, including
$2.3 million contingency.
- Pre-production development time is less than one year.
- Mine production of over 3 years.
- Net average after-tax undiscounted operating cash flow of
approximately $11.0 million per full year of operation.
- Life of Mine payable production of 6.6 million ounces of
silver
- Average annual silver production during first three years of
operation of 1.8 million ounces
- Life of mine average silver recovery of 85.4%
- Payback is approximately 1.8 years
*Base Case uses $18.50/oz silver.
The PEA is preliminary in nature and includes
inferred mineral resources that are considered too speculative
geologically to have the economic considerations applied to them
that would enable them to be categorized as mineral reserves, and
there is no certainty that the economic results described in the
PEA will be realized. Mineral resources that are not mineral
reserves do not have demonstrated economic viability.
The SP Mine has previously incurred significant
losses which may be available to offset U.S. Federal tax liability
of the SP Mine should sufficient taxable income be generated by
Aurcana at the SP Mine prior to their expiry. These potential
tax loss carry forwards are not reflected in the results presented
herein.
The Base Case discounted cash flows in the PEA
are provided as both pre-tax and after-tax figures, and are
prepared in compliance with NI 43-101. The PEA was completed by
Mine Development Associates
("MDA"), Cementation USA Inc.
(“Cementation”), Samuel
Engineering, Inc. (“Samuel”) and
Gault Group, each independent engineering firms. Due to rounding,
some of the totals in the tables in this news release may not sum
exactly.
Table 5 summarizes key economic indicators from
the PEA. A pre-tax analysis of the cash flow from the Project was
completed and the assumed US Federal Tax rate was applied.
The Texas Franchise Tax (0.075% of adjusted revenue) was included
in both the pre-tax and after-tax cases.
Table
5: Key Economic
Indicators ($18.50/oz Silver Base Case)
Parameter |
PEA Base Case
Results |
Pre-tax IRR |
48.0% |
Pre-tax NPV (5%) |
$21.6 million |
After-tax IRR |
37.0% |
After-tax NPV (5%) |
$15.8 million |
After-tax Payback from 1st production |
1.8 years |
Initial CAPEX (Including contingency) |
$20.6 million |
Total CAPEX (Including sustaining and contingency) |
$22.1 million |
Average Annual Silver Production for first 3
years |
1.8 million ounces |
Life of Mine Silver Production |
6.6 million ounces |
Table 6 summarizes the metal price sensitivity of the main
economic outputs of the PEA.
Table
6:
Sensitivity
of SP Mine
PEA Key
Economic Indicators
Economic
Indicators |
Low
Case |
Base
Case |
High
Case |
Silver Price |
$/oz |
16 |
18.50 |
21 |
Pre Tax NPV (5%) |
$ Million |
7.8 |
21.6 |
35.4 |
Pre Tax IRR |
% |
21.2 |
48.0 |
73.4 |
After Tax NPV (5%) |
$ Million |
4.4 |
15.8 |
27.1 |
After Tax IRR |
% |
14.4 |
37.0 |
58.3 |
After Tax Payback Period from 1st production |
Years |
2.8 |
1.8 |
1.4 |
Net Average Annual Operating Free Cash Flow Per Full
Year of Operation (After Tax) |
$ Million |
7.3 |
11.0 |
14.7 |
Note: The Base Case metal price is based on the
May 2018 Standard and Poor’s Market Intelligence Consensus price
for 2020 of $18.50 per ounce.
The key economic indicators are summarized on an annual basis in
Table 7.
Table
7: Key Economic Indicators by YearTotals may not
sum due to rounding
Key Economic
Indicator |
Year 0 |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Life of Mine |
Recovered Ag Ounces (millions) |
|
1.9 |
1.8 |
1.7 |
1.1 |
6.6 |
State Franchise Tax ($millions) |
|
0.11 |
0.11 |
0.09 |
0.07 |
0.38 |
Total After Franchise Tax Revenue ($millions) |
|
35.1 |
33.1 |
31 |
18.8 |
118 |
Total Operating Costs ($millions) |
|
20 |
18.9 |
19.1 |
9.9 |
67.9 |
Total Pre Tax Profit ($millions) |
|
15.1 |
14.1 |
11.9 |
8.9 |
50.0 |
Depletion Taken ($millions) |
|
5.3 |
5.0 |
4.7 |
2.8 |
17.7 |
Taxable Income ($million) |
|
9.8 |
9.2 |
7.2 |
6.1 |
32.3 |
Tax ($million)8 |
|
2.1 |
1.9 |
1.5 |
1.3 |
6.8 |
After Tax Net Profit ($million) |
|
13.0 |
12.2 |
10.4 |
7.6 |
43.2 |
Total Capital Cost ($millions) |
20.6 |
0.4 |
0.9 |
1.2 |
-1.1 |
22.1 |
Working Capital ($millions) |
|
3.3 |
-3.3 |
|
|
0 |
After Tax Cash Flow ($ million) |
-20.6 |
9.3 |
14.6 |
9.1 |
8.7 |
21.2 |
$/Ton Milled |
|
95.19 |
90.21 |
91.04 |
83.38 |
90.76 |
All In Sustaining Cost per Ounce9 ($/oz Ag) |
|
10.84 |
11.20 |
12.21 |
9.04 |
11.01 |
MINING
OPERATION
The PEA contemplates mining to commence in the
Presidio mine area accessed by a decline that was established
between 2011 and 2013. Mining will generally proceed from
Presidio toward the Shafter area and feed the modified existing
mill at a rate of 600 tons per day (TPD) or 210,000 tons
annually.
Mining is planned by room and pillar methods for
primary extraction and long hole slashing with partial pillar
recovery for secondary extraction. The mine design is based
on a 6.8 ounce silver per ton cutoff grade. Stope shapes
account for internal dilution. External dilution is added at
10% with an average grade of 5.1 ounce silver per ton (based on 75%
of cutoff grade). Primary and secondary extraction account
for 78 percent and 11 percent of the resource, respectively,
providing an overall extraction of 89 percent. Extraction
losses account for the remaining 11%. The extraction rate was
developed using planned stopes with widths of 28 feet, with 24 ft
by 24 ft pillars.
Vulcan mining software was used to outline and
design the areas to be mined. A minimum mining height of 8
feet was used to define minable areas. The grade model used
blocks that were 10 ft x 10 ft x 4 ft high. The outlines were
done in plan views at 8 feet mid-block elevation intervals of the
block-diluted resource model. The minimum mining height of 8
feet was used to allow mechanized mining. The outlines
include all internal dilution (i.e. material below
cutoff).
The total mill throughput in the PEA is
estimated to be 748.7 thousand tons, of which 68% are currently
classified in the Resource Estimate as measured and indicated
mineral resources, and 32% are currently classified as inferred
mineral resources. A 6.8 oz/t cutoff grade was reflected in the
underground mine design. The cut-off grade incorporates mine and
process plant operating costs and recovery data.
MINERAL
RESOURCE
ESTIMATE
MDA completed the updated Resource Estimate for
the SP Mine in January 2016 – see Aurcana’s news release dated
January 12, 2016 and the technical report dated January 11, 2016,
titled “Technical Report on the Shafter Silver Project, Presidio
County, Texas”, which is filed on SEDAR.
Key
Features:
- The SP Mine drill-hole assay database contains 20,006 silver
assays from 1,694 drill holes. Of the drill holes, 155 were drilled
by Aurcana. The majority of drill holes (992 holes) in the database
are underground core holes completed by American Metal Company
prior to 1942, followed by Gold Fields Mining with 403 holes.
- Silver grades fall into two natural populations as low- and
high-grade silver domains. The low-grade domain is associated with
weakly fractured and silicified limestone characterized by silver
grades between 0.8 ounces Ag/ton and 5.0 ounces Ag/ton. The
high-grade domain (>5.0 ounces Ag/ton) is associated with
strongly silicified, fractured limestone.
- Resource blocks having five percent or greater underground
workings were removed from the classified mineral resource.
- Compositing was done to 4-foot down-hole lengths, matching the
model block size and honoring all mineral-domain boundaries.
- Four tonnage factors ranging from 12 to 14 ft3/ton were used,
reflecting low-grade, high-grade domains, non-mineralized units and
zones of clay or rubble.
- The reported mineral resources were estimated by
inverse-distance to the third power to estimate the grade of each
block; ordinary kriging and nearest-neighbor estimates were used
for comparison and validation. The stated resource is fully diluted
to 10 ft by 10 ft by 4 ft blocks and is tabulated on a silver
cutoff grade of 4.0 ounces Ag/ton.
Additional drilling, underground mapping and
sampling, geotechnical work and targeted metallurgical tests are
recommended by MDA.
Table 8 shows the mineral resources at a series
of silver cutoff grades, 4 oz/t silver cutoff grade is the basis
for the reported resource estimate. The effective date of the
resource estimate is December 11, 2015 and the resource estimate
was prepared by Paul Tietz, C.P.G of MDA, an independent qualified
person within the meaning of NI 43-101.
Table 8: SP Mine Deposit Mineral Resources –
December 11, 2015.
SP Mine Measured
Resources |
|
|
|
|
Cutoff(oz
Ag/ton) |
Tons |
Ag oz/t |
Contained Silver
Ounces |
2 |
220,000 |
5.55 |
1,200,000 |
3 |
170,000 |
7.39 |
1,006,000 |
4 |
100,000 |
8.73 |
888,000 |
5 |
80,000 |
9.77 |
799,000 |
6 |
70,000 |
10.70 |
719,000 |
7 |
60,000 |
11.68 |
637,000 |
8 |
50,000 |
12.53 |
567,000 |
9 |
40,000 |
13.49 |
494,000 |
10 |
30,000 |
14.48 |
426,000 |
12 |
20,000 |
16.84 |
299,000 |
15 |
10,000 |
20.14 |
185,000 |
20 |
3,000 |
25.71 |
80,000 |
|
|
|
|
SP Mine Indicated
Resources |
Cutoff (oz
Ag/ton) |
Tons |
Ag oz/t |
Contained Silver
Ounces |
2 |
2,490,000 |
5.60 |
13,967,000 |
3 |
1,940,000 |
7.56 |
11,646,000 |
4 |
1,110,000 |
9.15 |
10,171,000 |
5 |
880,000 |
10.41 |
9,114,000 |
6 |
710,000 |
11.53 |
8,230,000 |
7 |
580,000 |
12.69 |
7,363,000 |
8 |
470,000 |
13.89 |
6,550,000 |
9 |
380,000 |
15.22 |
5,757,000 |
10 |
310,000 |
16.47 |
5,122,000 |
12 |
210,000 |
19.07 |
4,039,000 |
15 |
130,000 |
22.67 |
2,954,000 |
20 |
60,000 |
28.71 |
1,772,000 |
Measured and Indicated
Resources |
Cutoff(oz
Ag/ton) |
Tons |
Ag oz/t |
Contained Silver
Ounces |
2 |
2,710,000 |
5.60 |
15,167,000 |
3 |
2,110,000 |
6.00 |
12,652,000 |
4 |
1,210,000 |
9.14 |
11,059,000 |
5 |
960,000 |
10.33 |
9,913,000 |
6 |
780,000 |
11.47 |
8,949,000 |
7 |
640,000 |
12.50 |
8,000,000 |
8 |
520,000 |
13.69 |
7,117,000 |
9 |
420,000 |
14.88 |
6,251,000 |
10 |
340,000 |
16.32 |
5,548,000 |
12 |
230,000 |
18.86 |
4,338,000 |
15 |
140,000 |
22.42 |
3,139,000 |
20 |
63,000 |
29.40 |
1,852,000 |
|
|
|
|
Inferred
Resources |
Cutoff (oz
Ag/ton) |
Tons |
Ag oz/t |
Contained Silver
Ounces |
2 |
2,610,000 |
4.29 |
11,189,000 |
3 |
1,370,000 |
6.00 |
8,193,000 |
4 |
870,000 |
7.47 |
6,511,000 |
5 |
650,000 |
8.49 |
5,518,000 |
6 |
490,000 |
9.47 |
4,649,000 |
7 |
370,000 |
10.41 |
3,887,000 |
8 |
280,000 |
11.45 |
3,160,000 |
9 |
200,000 |
12.50 |
2,549,000 |
10 |
150,000 |
13.57 |
2,044,000 |
12 |
70,000 |
16.25 |
1,207,000 |
15 |
40,000 |
19.28 |
712,000 |
20 |
10,000 |
24.34 |
267,000 |
Notes:
(1) |
MDA is
reporting the resources at cutoff grades that are reasonable for
deposits of this nature that will be mined by underground methods.
As such, some economic considerations were used to determine cutoff
grades at which the resource is presented. MDA considered
reasonable metal prices and extraction costs and recoveries, albeit
in a general sense, and then reduced the resource cut-off grade to
account for that material that would become mill feed using
internal cutoffs. |
(2) |
No
assumptions were made for mining recovery. |
(3) |
An external
dilution factor was not considered during this resource
estimation. |
(4) |
Internal
dilution within a 10 foot x 10 foot x 4 foot SMU (selective mining
unit) was considered. |
(5) |
Mineral
resources that are not mineral reserves do not have demonstrated
economic viability. |
(6) |
Rounding
errors may occur. |
METALLURGY
AND PROCESSING
Samuel was retained to review the metallurgy of
the SP Mine as well as assess the suitability of the existing 1,500
TPD process plant and estimate process operating and capital costs.
The SP Mine has a history of operations and test work that indicate
the mineralization is amenable to several techniques of
beneficiation and extraction. Though slight improvements in
recovery can be achieved through concentration of the mill feed and
focused leaching, the main factor for achieving desirable recovery
is affected by grinding and cyanide leaching.
Predicted recovery rates are dependent on the
head grade due to a relatively constant tails grade. The
consistency of the tails grade is due to occluded silver and silver
mineral, locked in quartz or jarosite minerals at or below 10
micron range. Practically all the non-encapsulated silver
appears to be recoverable, making the recovery prediction highly
dependent on the mill feed head grade.
The SP Mine processing facility proposed in the
PEA will use whole ore cyanide leach to extract silver from the
mill feed. Metal recovery will be accomplished using a standard
counter-current decantation (CCD) and Merrill Crowe method.
Run of mine material will be crushed to a nominal 1 inch crushed
product using a single jaw crusher for primary crushing and a cone
crusher in closed circuit with a product screen for secondary
crushing.
Milling to the final leach feed product size of
80 percent passing 74 microns will be achieved by a single ball
mill in closed circuit with cyclones for classification. The leach
tanks are designed for 72 hour retention to achieve an estimated
silver extraction rate of 85.4 percent. The slurry from the
leach circuit will report to the CCD circuit using four thickeners
for cleaning of the slurry of pregnant leach solution at an
anticipated efficiency of 96 percent. The pregnant solution
from the CCD circuit will flow to the Merrill Crowe circuit.
Cleaned residue from the CCD circuit is pumped to the tailings
plate and frame filters for one final wash before the residue cake
is conveyed to a tailings load out area where it will be haul to a
lined dry stacked tailings storage facility.
Silver precipitate cake from Merrill Crowe is
transferred to a retort for drying and to remove any contained
mercury which will be collected for offsite disposal. The
dried cake from the retort is then mixed with flux and melted in a
gas fired furnace for pouring into silver doré. The silver doré is
stored in a safe until it is shipped off site to a refiner.
CAPITAL
COSTS
The pre-production capital cost estimate
includes the mine capital expenditures, environmental costs,
owner’s and indirect costs, refurbishment of the existing mill, new
mine equipment fleet, expansion of the tails rinsing circuit,
addition of instrumentation and contingency.
Sustaining capital costs include mine equipment
rebuilds.
Development capital costs for the PEA are
reflective of the condition of the present underground workings and
work necessary to recommence underground mining operations.
Initial capital and sustaining capital costs for
the PEA, summarized below in Table 9, were estimated using current
data and pricing, and assume the prior completion of the equipment
purchase pursuant to the Equipment Purchase Agreement.
Table
9:
Summary
of SP Mine
capital
cost
estimates.
Category |
Capital Cost
($000’s) |
Pre-Production |
Sustaining
Capital |
Total Capital |
Mine |
16,062 |
2,019 |
18,081 |
Processing |
2,221 |
0 |
2,221 |
Contingency |
2,302 |
585 |
2,887 |
Equipment - Salvage |
|
-1,123 |
-1,123 |
Total |
20,586 |
1,481 |
22,067 |
OPERATING
COSTS
Total operating costs for the Project are
estimated to be $90.76/ton of mill feed. Mining costs were
estimated as $56.76/ton milled. Table 10 below shows a breakdown of
the operating cost categories on an average cost per ton of mill
feed basis.
Table
10:
Summary
of
PEA
operating
cost
estimates.
Operating Cost |
$/ton milled |
Mining (mill feed and waste) |
56.76 |
Tails Transport |
2.00 |
Processing |
22.42 |
G&A |
8.72 |
Reclamation |
0.86 |
Total On-Site
Costs |
90.76 |
PERMITTING
Permits required for the development of the SP
Mine are in place. Aurcana is not aware of any permitting-related
impediment to commencing operations.
AURCANA NEAR-TERM EXPLORATION
PLANS
With the release of a positive PEA study,
Aurcana believes future work should include confirmation of
resources in the early years of the mine plan and conversion of
inferred resources.
Additional exploration and advanced engineering
studies include:
- In-fill and step-out drilling;
- Variability tests of potential mill feed to confirm process
plant performance; and
- Refinement of engineering studies (mining, process,
geotechnical, infrastructure, operating and capital cost
estimation, etc.).
PEA
PREPARATION
AND
QUALIFIED
PERSONS
The PEA, with an effective date of July 11,
2018, was completed independently by Mine Development Associates,
Reno NV, Cementation, Salt Lake City UT, Samuel Engineering, Denver
CO and Gault Group, Cortez CO. The information in this news release
that relates to the geology and resources of the PEA was prepared
by: Paul Tietz, CPG, of MDA. The information in this news release
that relates to the mine plan, mine capital and mine operating
costs was prepared by Bill Tilley P.E. of Cementation The
information in this news release that relates to processing,
process operating and process capital costs and metallurgy portions
of the PEA was prepared by: Matt Bender P.E., of Samuel
Engineering. The information in this news release related to
permitting was prepared by Martin Demarse, P.E. of Gault Group. The
information in this news release related to the financial model was
prepared by Neil Prenn P.E. of MDA.
Mr. Prenn, Mr. Tilley, Mr. Tietz, Mr. Bender and
Mr. Demarse are each independent qualified persons within the
meaning of NI 43-101.
Kevin Francis, SME Registered Member, Vice
President – Project Development of Aurcana, a Qualified Person as
defined by NI 43-101, reviewed and approved the technical
information regarding the SP Mine in this news release.
A technical report supporting the PEA will be
filed on SEDAR within 45 days.
ABOUT AURCANA
CORPORATION
Aurcana Corporation owns the Shafter-Presidio Silver Project in
Texas, US. The Shafter-Presidio Silver Project was put on care and
maintenance in December 2013, in part due to depressed silver
prices.
ON BEHALF OF THE BOARD OF DIRECTORS OF AURCANA CORPORATION
“Kevin Drover”, President & CEO
For further information, visit the website at www.aurcana.com or
contact:
Aurcana CorporationPhone: (604) 331-9333
Gary Lindsey, Corporate CommunicationsPhone:
(720)-273-6224Email: gary@strata-star.com
CAUTIONARY
NOTES
This press release contains forward looking
statements within the meaning of applicable securities laws.
The use of any of the words “anticipate”, “plan”, “continue”,
“expect”, “estimate”, “objective”, “may”, “will”, “project”,
“should”, “predict”, “potential” and similar expressions are
intended to identify forward looking statements. In
particular, this press release contains forward looking statements
concerning, without limitation, the completion of the Proposed
Transaction and the Offering (including the timing of completion
and receipt of shareholder and regulatory approvals therefor), the
anticipated terms and conditions of the Definitive Agreement,
matters concerning the governance of the Resulting Issuer, future
mineral reserves and mineral resources, and the anticipated future
results of mining activities at the SP Mine and the RV Mine
(including economic results thereof). Although the Company believes
that the expectations and assumptions on which the forward looking
statements are based are reasonable, undue reliance should not be
placed on the forward looking statements because the Company cannot
give any assurance that they will prove correct. Since
forward looking statements address future events and conditions,
they involve inherent assumptions, risks and uncertainties.
Actual results could differ materially from those currently
anticipated due to a number of assumptions, factors and
risks. These assumptions and risks include, but are not
limited to, assumptions and risks associated with the result of
drilling and exploration activities, that contracted parties
provide goods and/or services on the agreed timeframes, risks
related to future metals prices, that equipment necessary for
exploration is available as scheduled and does not incur unforeseen
break downs, that no labour shortages or delays are incurred, that
plant and equipment function as specified, that no unusual
geological or technical problems occur, and that laboratory and
other related services are available and perform as contracted.
Management has provided the above summary of
risks and assumptions related to forward looking statements in this
press release in order to provide readers with a more comprehensive
perspective on the Company’s future operations. The Company’s
actual results, performance or achievement could differ materially
from those expressed in, or implied by, these forward looking
statements and, accordingly, no assurance can be given that any of
the events anticipated by the forward looking statements will
transpire or occur, or if any of them do so, what benefits the
Company will derive from them. These forward looking
statements are made as of the date of this press release, and,
other than as required by applicable securities laws, the Company
disclaims any intent or obligation to update publicly any forward
looking statements, whether as a result of new information, future
events or results or otherwise.
_____________________________________________________1 The Base
Case in the RV Mine FS uses a price deck of $18.50 Ag, $1,300 Au,
$1.00 Pb, and $1.20 Zn.2 The Base Case in the SP Mine PEA uses a
price deck of $18.50 Ag.3 The Base Case in the RV Mine FS uses a
price deck of $18.50 Ag, $1,300 Au, $1.00 Pb, $1.20 Zn.4 Aurcana,
Ouray and combined pro-forma Aurcana-Ouray figures are based on
both (a) the RV Mine FS prepared by SRK and Ouray analysis and (b)
the NI 43-101 Aurcana Preliminary Economic Analysis issued by Mine
Development Associates effective July 11, 2018
(“PEA”). All mineral
resources are shown inclusive of mineral reserves.5 Life of time
(“LOM”) of 4 years.6 First 5 full
years of production.7 AISC or All In Sustaining Costs is a non-IFRS
and Non-GAAP measure; AISC includes all production costs related to
extraction and processing as well as costs associated with
transportation, treatment, refining and other selling costs plus
capital costs8 Assumes 21% Federal Tax Rate and no application of
tax loss carry forwards9 AISC or All In Sustaining Costs is a
non-IFRS and Non-GAAP measure; AISC includes all production costs
related to extraction and processing as well as costs associated
with transportation, treatment, refining and other selling costs
plus capital costs
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