Pure Gold Mining Inc (TSX-V:PGM, LSE:PUR, OTC:LRTNF) has agreed to be acquired by West Red Lake Gold Mines Ltd (WRLG).
The company said it has entered into a binding letter of agreement with WRLG and Sprott Resource Lending Corp, whereby WRLG will acquire all of the issued and outstanding shares of the company subject to the approval of the British Columbia Supreme Court under its ongoing proceedings under the Companies Creditors Arrangement Act.
WRLG has agreed to pay C$6.5 million in cash, issue 28.46 million common shares, and grant a 1.0% secured Net Smelter Royalty (NSR) on the Madsen Gold Project as consideration for the acquisition, as well as up to US$10.0 million in deferred consideration payments.
The share and NSR consideration is expected to accrue to Sprott as a fund managed by the company is the senior secured lender to the company.
In addition, US$10.0 million in deferred consideration is payable upon a change of control of WRLG with the acquirer having the right to pay down any part of the deferred consideration prior to any change of control.
Closing of the acquisition will be subject to several conditions, including the approval of the TSX Venture Exchange.
Pure Gold Mining owns and operates the Pure Gold mine, located in Red Lake, Ontario, which began gold production in 2021 after the successful construction of an 800 tonnes per day (tpd) underground mine and processing facility. The mine is centered on a forty-seven square kilometre property with significant discovery potential.
Back in October 2022, the company announced that it was suspending operations and placing the PureGold Mine on care and maintenance immediately because the mine has not yet achieved consistent positive site-level cash flow, notwithstanding recent reductions in operating costs and sequential quarter-over-quarter increases in production. Pure Gold subsequently filed for proceedings under the Companies Creditors Arrangement Act.
Contact the author at jon.hopkins@proactiveinvestors.com