Goldgroup Mining (TSX-V:GORO) has committed US$75 million ($106.9 million) to acquire a 19.9% stake in Luca Mining (TSX-V:LUCA) through subscription receipts.
The company entered into a binding commitment to participate in Luca’s US$110 million private placement announced on 21 September. The investment supports Luca’s proposed acquisition of the Cozamin Mine in Zacatecas, Mexico.
Goldgroup’s investment replaces the US$75 million equity backstop previously provided by Trafigura. Following conversion of the subscription receipts into Luca common shares and completion of the Cozamin acquisition, Goldgroup expects to hold approximately 19.9% of Luca’s issued and outstanding shares on a non-diluted pro forma basis.
The company will finance the investment from existing cash, including proceeds from its non-brokered private placement completed on 25 September that generated gross proceeds of approximately US$121.8 million.
Following that financing, Goldgroup’s cash balance is at approximately US$166 million.
According to Goldgroup, the net proceeds of the financing are earmarked for working capital and general corporate purposes, including advancing its existing portfolio and evaluating strategic investments and mergers and acquisitions opportunities in the mining sector.
After financing the investment commitment and before transaction costs, Goldgroup expects to retain approximately US$91 million in cash, preserving financial capacity to advance its existing portfolio and evaluate additional growth opportunities.
Under the investment terms, each subscription receipt will be convertible into one Luca share when all escrow release conditions are satisfied, including completion of the Cozamin acquisition and receipt of required corporate and regulatory approvals.
Luca has agreed to provide Goldgroup with certain investor rights once the company beneficially owns at least 10% of outstanding Luca shares. The rights include nominating two directors to Luca’s board, together with equity participation and anti-dilution rights.
Luca announced on 21 September that it entered into a definitive share purchase agreement with Capstone Copper (TSX:CS) to acquire 100% of the Cozamin Mine for US$290 million in upfront consideration and up to $95 million in deferred and contingent consideration.
Cozamin is an underground copper-silver mine that has operated continuously for approximately 20 years with established infrastructure, including paste backfill and filtered tailings systems.
Completion of Goldgroup’s investment remains subject to applicable closing conditions, including approval of the TSX Venture Exchange. The Cozamin acquisition remains subject to required regulatory approvals and other closing conditions.
Goldgroup Mining is a Canada-based mining company with assets in Mexico and the US.
Write to Paula Fabe at Mining.com.au
Main image: Luca Mining
