Bear Creek Alters Payment to Acquire the Mercedes Mine

The Canada-based mining company Bear Creek announced it has reached an agreement with Equinox Gold to amortize a pending payment to acquire an important mining asset over two years.

Bear Creek reached a Heads of Agreement with Equinox Gold to amortize US$25 million pending the acquisition of the Mercedes gold mine. According to the original agreement, this payment was to be made on Oct. 26, 2022. However, the Heads of Agreement will allow the company to convert the pending payment into a promissory note with a deadline on Oct. 21, 2024, with capital and interest payments beginning in February 2023. 

The company said this agreement represents a great opportunity since it will allow it to align the final payment for the asset to the cash flow the mine generates “We would like to thank Equinox Gold for allowing us to make this payment in a manner that avoids equity dilution. The Mercedes improvement program is delivering positive results and we expect gold production and free cash flow to increase as these improvement initiatives are implemented,” said Anthony Hawkshaw, CEO, Bear Creek. 

The agreement allows the company to prepay a portion of the promissory note before the deadline without penalty. At the same time, Bear Creek will grant Equinox Gold warrants to acquire up to 5 million of its shares. Equinox will be able to convert the warrant into shares at any time within the next three years after six months following their issuing, at a 15 percent premium to the 5-day volume weighted average price of the shares on the day they were granted.

Bear Creek said that the Mercedes mine is a key asset for its transition from a development stage company to a precious metals producer. Nevertheless, the acquisition has presented some difficulties: In January 2022, Bear Creek acquired the mine from Equinox Gold with an agreement that made the latter the major shareholder of Bear Creek. Nonetheless, TRR Royalties, a subsidiary of Trident Royalties, requested an arbitration order prohibiting the closing of the deal as the company considered the Mercedes mine was within its territory because of an agreement TRR reached with Equinox Gold’s subsidiaries in January 2022. Bear Creek said that TRR’s complaints were unfounded, and in April 2022, it announced it acquired the asset since Equinox Gold formally owned it.

The Mercedes mine is located in Sonora, within a prolific epithermal gold belt. The asset comprises 43 mining concessions that cover over 69,285ha.