Santacruz Silver has entered into a legally-binding term sheet with Peñoles to acquire the Zimapan mine in Hidalgo for US$20 million plus applicable VAT. The agreement was reached through the companies’ subsidiaries and its completion remains subject to a number of conditions, including approval of the TSX Venture Exchange.
The Zimapan mine is currently under lease by Santacruz’s subsidiary Carrizal from Peñoles’ subsidiary Minera Cedros. The lease expires on December 31, 2020. The Zimapan mine has had a long history with recent production for over the past 10 years. During this time, mining operations were based on underground diamond drilling programs, stated Santacruz.
“Adding the Zimapan Mine, which I have had the privilege to lead throughout the last 12 years, to the company's existing mining projects would be a transformational transaction for Santacruz. This acquisition is expected to pave the way for the future growth of Santacruz toward becoming a mid-tier silver producer. We wish to thank Peñoles’ management for their support throughout this process,” stated Carlos Silva, Santacruz's CEO.
Santacruz reported that the assets to be acquired include the Zimapan mill facility, 34 mining concessions and surface and underground infrastructure to carry on day-to-day operations. As described by the company, the Zimapan mill is a 75,000 dry metric tons per month facility with zinc, lead and copper circuits. Over the past five years it has produced an annual average of 12,400 tons of zinc, 3,300 tons of lead, 1,850 tons of copper and 1.29Moz of silver from an average annual throughput of 700,000 tons of mineralized material.
The 34 mining concessions cover an area of 5,139ha, Santacruz noted. They are located seven kilometers from the municipality of Zimapan, Hidalgo. To date, Carrizal has identified 14 mineral zones that are characterized as polymetallic replacement mineralization of Pliocene age. Within the mineral zones, silver, lead, zinc and copper minerals have preferentially replaced the carbonate host rocks and pre-existing skarn bodies to produce disseminated, semi-massive sulphide and massive sulphide bodies that occur in proximity to monzonitic intrusions and quartz-feldspar porphyry dikes.
The transaction is projected to be completed by December 15, 2020. If this does not happen, then the party responsible must pay the other party a break fee. Carrizal will be able to ask for an extension of the closing deadline to January 31, 2021 and can thereafter further request an extension to March 31, 2021. These extensions are subject to certain conditions related to the royalties generated in connection with the existing lease of the Zimapan mine.