Cerrado Gold reports US$20M Manantial Espejo mine purchase
The Argentine acquisition brings a roughly US$13.8 million closure guarantee, assumed liabilities and a planned 2027 restart.
Mara Quinlan
Cerrado Gold Inc. CVECERT OTCMKTSCRDOF said on Friday it has acquired the Manantial Espejo mine in Argentina for US$20 million in cash. The purchase adds a mill with capacity of 2,500 tonnes per day and requires a closure guarantee of about US$13.8 million.
Shares rose 0.47 per cent to C$2.12 at Thursday’s 4:00 p.m. EST close in Toronto, according to the CVECERT quote. That session preceded the acquisition announcement.
The purchase from Pan American Silver Corp. TSEPAAS NYSEPAAS, announced on Nov. 13, included US$10 million paid at closing. Deferred cash payments of US$5 million each fall due on the first and second anniversaries.
Cerrado said its Minera Don Nicolás subsidiary will provide all acquisition and start-up funding, and no shares are being issued as consideration. Management plans to return the mine to production in 2027.
"Based on our due diligence, we have developed a phased redevelopment and refurbishment plan to bring the operations back into production in 2027," Cerrado chief executive and chair Mark Brennan said in the release.
Cerrado acquired all shares of Minera Tritón Argentina S.A., which owns the mine and related concessions, on an as-is basis. It assumed all historical, current and future liabilities, including closure obligations.
No shareholder vote was required, and Cerrado described the acquisition as an arm’s-length transaction.
The acquired company granted the seller a 1.0 per cent net smelter returns royalty on all future property production to settle existing intercompany debt. That royalty is secured by a first-degree mortgage over the mining concessions and a Cerrado parent guarantee.
Certain concessions also carry a pre-existing 0.5 per cent net smelter return royalty. Cerrado said it was unaware of other material indebtedness beyond the intercompany debt settled through the new royalty.
In its Nov. 13 announcement, Cerrado said it would satisfy the approximately US$13.8 million closure guarantee through a financial institution's letter of credit. The company said this would avoid an impact on working capital.
Cerrado already operates the Minera Don Nicolás gold mine in Santa Cruz, the same Argentine province as Manantial Espejo. The acquired property covers approximately 45,255 hectares and includes historical open pits and underground workings. The holding comprises 25 mining properties and three owned ranches that support mining and exploration.
Mining at Manantial Espejo ended in 2022, and the operation entered care and maintenance in early 2023. Cerrado said its due diligence indicated the existing processing facilities remained in good condition.
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Cerrado's next operating target is a phased return to production at Manantial Espejo in 2027.
