VANCOUVER, BC, Feb. 25, 2022 /CNW/ - Josemaria Resources
Inc. (TSX: JOSE) (OMX: JOSE) (OTCQB: JOSMF) ("Josemaria
Resources", the "Company" or "Josemaria"), is pleased to announce
its results for the year ended December 31,
2021. View PDF version.
Adam Lundin, Josemaria Resources'
Chief Executive Officer, comments: "As we continue to advance the
Josemaria Project via Basic Engineering, a multi-faceted
65,000-metre drill program which commenced in Q4 2021, and active
engagement with federal and San Juan provincial authorities in
Argentina regarding ESIA approval
and commercial and fiscal terms applicable to the Project, we are
very pleased to have announced the proposed Transaction with Lundin
Mining. Lundin Mining shares Josemaria's vision of developing one
of the next great copper mines in Argentina, and this shared vision, combined
with Lundin Mining's substantial expertise at developing and
operating world-class copper projects and access to the requisite
financing to construct the Josemaria Project, will be instrumental
in guiding Josemaria to the next stages of development."
TRANSACTION WITH LUNDIN MINING
On December 20, 2021 the Company
announced it had entered into a binding agreement (the "Arrangement
Agreement") with Lundin Mining Corporation ("Lundin Mining")
whereby Lundin Mining will acquire all of the outstanding common
shares of Josemaria (the "Transaction").
Under the terms of the Transaction, Josemaria shareholders will
receive total consideration of approximately $625 million on a fully diluted basis,
representing $1.60 per common share.
Josemaria shareholders will be able to elect to receive the
consideration as either (i) $1.60 in
cash or (ii) 0.1487 of a Lundin Mining share, or some combination
of cash and shares, subject to proration. The total consideration
will be subject to maximum aggregate cash consideration of
approximately $183 million
(representing 30% of the aggregate consideration). The
consideration represents a premium of 31% and 29% to the closing
price and the 10-day volume weighted average price, respectively,
of Josemaria's shares on the TSX for the period ending December 17, 2021. On closing of the Transaction,
Josemaria shareholders are expected to own approximately 5% of
Lundin Mining, on a partially diluted basis.
On February 17, 2022, Lundin
Mining announced a semi-annual variable performance dividend of
$0.11 per Lundin Mining share to be
paid to Lundin Mining shareholders. In accordance with the terms of
the Arrangement Agreement, the share consideration payable pursuant
to the Transaction will be adjusted such that, for each whole
Lundin Mining share that is issued to a Josemaria shareholder on
closing of the Transaction, $0.11 in
cash will also be paid to such Josemaria shareholder to reflect the
semi-annual variable performance dividend of Lundin Mining. The
cash consideration payable pursuant to the cash election or
pro-ration under the Arrangement Agreement will remain
unchanged.
The Transaction, which is not subject to any financing
conditions, will be carried out by way of a court-approved plan of
arrangement under the CBCA and will require approval by at least
(1) 66⅔% of the votes cast by Josemaria shareholders, and (2) 66⅔%
of the votes cast by Josemaria security holders (comprised of
shareholders and optionholders) at a special meeting expected to be
held to consider the Transaction. In addition to approval by
Josemaria shareholders, the Transaction is also subject to court
approval, regulatory approvals, including approval by the TSX and
Nasdaq Stockholm, the approval by the Swedish Financial Supervisory
Authority of a Swedish prospectus regarding Lundin Mining's offer
to Josemaria shareholders, and the admission of trading of the new
Lundin Mining shares and other customary closing conditions for
transactions of this nature. The Transaction is expected to be
completed in April 2022.
As part of the Arrangement Agreement, Lundin Mining agreed to
provide the Company with a loan in the principal amount of up to
US$100.0 million (the "Lundin
Debenture") to fund anticipated activities of the Company between
the date of execution of the Arrangement Agreement and closing of
the Transaction. Any principal amount outstanding on the Lundin
Debenture will accrue interest at a rate of 5.0% per annum with
payments due semi-annually on the last day of June and December.
The Lundin Debenture matures on June 30,
2022. On January 18, 2022, the
Company received the first draw on the Lundin Debenture in the
amount of US$29.8 million.
HIGHLIGHTS
- The Company continues to advance toward sanctioning
construction of the Josemaria Project. Highlights from 2021
include:
-
- Project Engineering has made significant advancements to
de-risk and optimize the process flowsheet with improvements in the
crushing/conveying, grinding and flotation circuits and tailings
facilities. An area of significant progress is the grinding
circuit, where the size of the SAG mills has been reduced from 42
to 40 feet in diameter, achieved through the implementation of a
2-stage pebble crushing circuit while maintaining the 150
kilo-tonnes per day design throughput. The Project has commenced
Basic Engineering with the goal of completion during the first half
of 2022;
- In Q4 2021, the Company commenced a 65,000-metre drill program,
having drilled 2,400 metres in December, aimed primarily at
providing development/infill geo-metallurgical data and acquiring
additional site geotechnical information for key Project
infrastructure and detailed mine planning. Life of mine
hydrogeology and aquifer modelling will be updated with additional
water well and piezometer drilling. It is anticipated that up to 8
rigs will be active at the peak of the drilling program. Management
has a high degree of confidence that drilling will lead to an
expansion of Indicated resources, and potentially reserves, as
Inferred material becomes better defined and reclassified. Regional
exploration program plans are being finalized to test targets
outside the current resource but adjacent to the Project;
- Following the submission of the Environmental and Social Impact
Assessment ("ESIA") in February 2021,
the Company continues to engage with the San Juan authorities in
their evaluation process;
- Plans for offsite infrastructure including access road,
electrical power, and logistics studies are ongoing, aimed at
finalizing plans for integration into the design of the Project
during Basic Engineering; and
- The Company has continued to aggressively recruit the team that
will ultimately be responsible for constructing and commissioning
the Project, including Mr. Phil
Brumit who has been appointed to the role of Executive Vice
President Projects and Operations and Mr. Reece Fuller who has been appointed to the role
of Senior Vice President Projects. Mr. Brumit and Mr. Fuller both
have decades of international mining, engineering, construction and
senior leadership experience.
- During the third quarter of 2021, the Company announced the
securing of two credit facilities, evidenced by debentures,
totaling US$20.0 million
(collectively the "2021 Facilities"), one with Lorito Holdings
S.à.r.l. ("Lorito") for US$10.0
million (the "Lorito 2021 Facility") and one with Zebra
Holdings and Investments S.à.r.l. ("Zebra") for US$10.0 million (the "Zebra 2021 Facility"), each
of which has a term of 18 months ending March 7, 2023. The Company concurrently announced
the extension of the maturity dates of all other Lorito and Zebra
debentures to March 7, 2023.
- During the second quarter of 2021, the Company successfully
closed a private placement of 58,708,900 common shares of the
Company at a price (the "Offering Price") of $0.69 per common share for gross proceeds of
$40.5 million. Concurrently, the
Company also closed a public offering (the "Offering") pursuant to
which a syndicate of underwriters purchased, on a bought deal
basis, 14,500,000 common shares at the Offering Price for gross
proceeds of $10.0 million, plus an
over-allotment option at the Offering Price of an additional
2,175,000 common shares for gross proceeds of $1.5 million, for total combined gross proceeds
of $52.0 million. The Company
incurred related share issuance costs of $1.4 million for net proceeds of $50.6 million.
OUTLOOK
The Company is taking all necessary steps required to complete
the Transaction with Lundin Mining which is expected to close
before the end of April 2022.
Operationally, the Company continues to advance the Josemaria
Project following completion of the Feasibility Study in the fourth
quarter of 2020 and submission of the ESIA in February 2021. In Q4 2021, the Company commenced
a 65,000-metre drilling program, aimed primarily at providing
development/infill geo-metallurgical data and acquiring additional
site geotechnical information for key Project infrastructure and
detailed mine planning. The Company has also commenced Basic
Engineering, which is expected to be completed in the first half of
2022, the procurement process of long-lead equipment and the
preparation of early works activities focused on providing
engineering, planning and financial details. Active engagement also
continues with federal and San Juan provincial authorities in
Argentina, including discussions
aimed at finalizing and securing commercial and fiscal terms
applicable to the Project and ESIA approval.
FINANCIAL RESULTS
|
Three months
ended December
31,
|
Year
ended December
31,
|
(in thousands,
except per share amounts)
|
2021
|
2020
|
2021
|
2020
|
Exploration and project
investigation expenses
|
$
|
32,366
|
$
|
3,588
|
$
|
59,694
|
$
|
29,934
|
Additions of fixed
assets
|
|
32,618
|
|
5
|
|
46,894
|
|
130
|
General and
administration ("G&A")
|
|
2,356
|
|
1,692
|
|
8,588
|
|
5,753
|
Foreign exchange and
trading gains realized on equity investments
|
|
(10,252)
|
|
(1,500)
|
|
(20,003)
|
|
(6,490)
|
Net loss
|
|
25,966
|
|
3,266
|
|
51,411
|
|
31,237
|
Basic and diluted loss
per share
|
|
0.07
|
|
0.01
|
|
0.14
|
|
0.12
|
The Company's net loss for the year ended December 31, 2021 was $51.4 million compared to $31.2 million in 2020. The increase in net loss
for 2021 mainly reflects the Company having conducted an increased
level of engineering, environmental and other key studies focused
on furthering the Josemaria Project towards development, plus the
commencement of a drilling program in Q4 2021, whereas the Company
did not conduct any sustained drilling programs in 2020.
General and administrative ("G&A") costs for the year ended
December 31, 2021 totaled
$8.6 million compared to $5.8 million in 2020. Salaries and benefits
increased by $1.4 million driven by
increased headcount as the Company continues to recruit key
personnel needed to ultimately develop the Josemaria Project.
Salaries and benefits were lower in the comparative 2020 period as
voluntary salary reductions were in effect during the year for the
senior management group. Share-based compensation costs also
increased by $1.1 million during 2021
as a result in increasing headcount. Share-based compensation is a
non-cash charge reflecting the expense associated with the vesting
of outstanding stock options during the period.
Exploration and project investigation expenses of $59.7 million were incurred in 2021, as compared
to $29.9 million incurred during
2020. During 2021, the Company's primary exploration and project
investigation expenses consisted of engineering and optimization
studies, expenses associated with supporting the ongoing ESIA
approval process in Argentina,
commercial and fiscal studies and negotiations, environmental
baseline studies, roadwork and related studies, and community
relations. The Company also began adding key employees to the team
responsible for Project execution.
During the year ended December 31,
2021, the Company incurred $46.9
million of fixed asset acquisition costs (2020 –
$9,226) including the acquisition of
camp assets related to the field season which commenced in Q4 2021
($19.7 million) and commitments
related to long-lead procurement assets ($22.8 million) to be used in eventual mine
construction.
From time to time, as part of the capital funding process from
the Canadian parent to the Argentinian subsidiary, the Company will
purchase equity instruments via a third-party investment broker.
The equity instruments are transferred from the parent to the
subsidiary and held for a pre-determined period, and then sold. The
Company conducts such transactions on an intra-period basis and
does not hold the equity instruments at period end. Upon receipt of
the transferred equity instruments by the local investment broker,
the Company realizes an immediate foreign exchange impact. This
foreign exchange impact is incurred directly as a result of holding
equity instruments with the intention of trading, and as such the
foreign exchange impact is also recognized through profit and loss.
For the year ended December 31, 2021,
the Company realized a trading loss of $3.7
million (2020 – $1.6 million)
offset by a foreign exchange gain of $23.7
million (2020 – $8.0 million)
as a result of holding the equity instruments for a net realized
gain of $20.0 million (2020 –
$6.4 million). The increase in net
gain is the result of the Company having conducted a higher dollar
value of such transactions during 2021 than in 2020 as a result of
funding increased in-country activity in Argentina.
During the year ended December 31,
2021, the Company recognized a net monetary loss of
$0.4 million (2020 – $0.4 million) in relation to the application of
hyper-inflationary accounting for the Company's Argentinian
subsidiary, which began July 1, 2018.
In other comprehensive loss, the Company recognized a gain of
$5.2 million resulting from the
impact of hyper-inflation which consists of adjustments recognized
on the continuing inflation of opening non-monetary balances during
the year ended December 31, 2021
(2020 – $0.7 million) and the ongoing
translation of the Company's Argentinian subsidiary into the
Canadian dollar presentation currency following July 1, 2018, as mentioned above. A detailed
discussion regarding the application of hyper-inflationary
accounting has been provided in Note 4 to the Company's 2021
audited consolidated Financial Statements.
SELECTED FINANCIAL INFORMATION
(in
thousands)
|
December
31, 2021
|
December
31, 2020
|
Cash
|
$
|
2,630
|
$
|
6,741
|
Working capital
deficit
|
|
(27,566)
|
|
(24,748)
|
Mineral
properties
|
|
12,401
|
|
10,065
|
Total
assets
|
|
69,362
|
|
19,745
|
Total
liabilities
|
|
(71,730)
|
|
(32,101)
|
The Company does not currently generate income from operations.
Please refer to the Transaction With Lundin Mining section above
detailing the proposed transaction which is anticipated to close
before the end of April 2022. As part
of the Arrangement Agreement, Lundin Mining agreed to provide the
Company with a loan in the principal amount of up to US$100.0 million (the "Lundin Debenture") to fund
anticipated activities of the Company between the date of execution
of the Arrangement Agreement and closing of the Transaction. If the
transaction with Lundin Mining does not complete or is delayed, the
Company anticipates that it will need further funding in order to
advance the Josemaria Project. Historically, capital requirements
have been funded through equity financing, joint ventures,
disposition of mineral properties and investments, and the use of
credit facilities with related parties. While management is
confident that additional sources of funding will be secured to
fund planned expenditures, factors that could affect the
availability of financing include the progress and results of
ongoing exploration and project investigation activities at the
Josemaria Project, the state of international debt and equity
markets, investor perceptions and expectations of the global
copper, gold, and/or silver markets, and the ongoing novel
coronavirus ("COVID-19") pandemic. If necessary, the Company may
explore opportunities to revise the due dates of its liabilities,
and/or settle its liabilities through the issuance of common shares
and other equity instruments. Based on the amount of funding
raised, the Company's planned initiatives and other work programs
may be postponed, or otherwise revised, as necessary.
QUALIFIED PERSONS
The technical information in this press release has been
reviewed and approved by Mr. Bob
Carmichael, P. Eng. (BC), the Company's Vice President of
Exploration, and Mr. Dustin Smiley,
P. Eng. (BC), the Company's Engineering Manager. Both Mr.
Carmichael and Mr. Smiley are Qualified Persons under National
Instrument 43-101 Standards of Disclosure for Mineral Projects.
ABOUT JOSEMARIA
Josemaria Resources Inc. is a natural resources company focused
on developing its advanced stage, 100% owned Josemaria Copper-Gold
Project in the San Juan Province of Argentina. A recently published Feasibility
Study (see "NI 43-101 Technical Report, Feasibility Study for
the Josemaria Copper-Gold Project, San Juan Province, Argentina" dated effective September 28, 2020 and filed on November 5, 2020) demonstrates a simple and
conventional open pit copper-gold project with robust economics and
a rapid payback period. Josemaria is a Lundin Group company and
works in partnership with the Lundin Foundation to execute best
practices in responsible mineral development in Argentina where the Lundins have a 30-year
track record of value creation. The Company is a reporting issuer
in all Provinces and its corporate head office is in Vancouver, BC. The Company's shares are listed
on the TSX and on Nasdaq Stockholm under the symbol "JOSE", and
trade on the OTCQB under the symbol "JOSMF".
ADDITIONAL INFORMATION
This is information that the Company is obliged to make public
pursuant to the Swedish Financial Instruments Trading Act. The
information was submitted for publication, through the agency of
the contact person set out below, on February 25, 2022, 17:00
EST.
On behalf of the Board of Directors of Josemaria Resources,
Adam Lundin,
President and CEO
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TSX: JOSE | OTCQB: JOSMF | Nasdaq Stockholm: JOSE | WKN: A2PN5S |
ISIN: CA48086P1009
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
This press release includes certain "forward-looking
information" and "forward-looking statements" (collectively
"forward-looking information") within the meaning of applicable
securities legislation. All statements, other than statements of
historical fact, included herein, including, without limitation,
the Company's plans and expectations regarding the Josemaria
Project, future price of copper, gold and silver; the results of
the Feasibility Study and expected timelines; the timing and amount
of estimated future production; net present values and internal
rates of return at the Josemaria Project; recovery rates; payback
periods; costs of production; capital expenditures; costs and
timing of the development of the Josemaria Project; mine life; the
potential future development of the Josemaria Project and the
future operating or financial performance of the Company; the
impact of COVID-19 on the Company's operations, hyper-inflationary
accounting, the effect of government regulations (or changes
thereto) with respect to restrictions on production, export
controls and duties, income taxes, royalties, expropriation of
property, repatriation of profits, environmental legislation, land
use, water use, mine safety, approval processes and the receipt of
necessary permits are forward-looking information.
Forward-looking information is frequently, but not always,
identified by words such as "expects", "anticipates", "believes",
"intends", "estimates", "potential", "possible", and similar
expressions, or statements that events, conditions, or results
"will", "may", "could", or "should" occur or be achieved. These
forward-looking statements may also include statements regarding
perceived merit of properties; exploration plans and budgets;
mineral reserves and resource estimates; work programs; capital
expenditures; timelines; strategic plans; market prices for
precious and base metals; or other statements that are not
statements of fact. In addition, statements relating to "mineral
resources" and "mineral reserves" are deemed to be forward-looking
information, as they involve the implied assessment, based on
certain estimates and assumptions that the mineral resources and
mineral reserves described can be profitably produced in the
future.
Forward-looking information involves various risks and
uncertainties. There can be no assurance that such information will
prove to be accurate, and actual results and future events could
differ materially from those anticipated in such information.
Important factors that could cause actual results to differ
materially from the Company's expectations include the Company's
ability to finance the development of its Josemaria Project;
commodity price fluctuations; assumptions and discount rates being
appropriately applied to the Feasibility Study, uncertainty as to
whether there will ever be production at the Company's Josemaria
Project and any other future mineral exploration and development
properties; risks related to the Company's ability to commence
production and generate revenues or obtain adequate financing for
its planned exploration and development activities; risks related
to lack of infrastructure including but not limited to the risk
whether or not the Josemaria Project will receive the requisite
permits and, if it does, whether the Company will build the
Josemaria Project; risks related to inclement weather which may
delay or hinder activities at the Company's mineral properties;
risks related to the Company's dependence on third parties for the
development of its projects; uncertainties relating to the
assumptions underlying resource and reserve estimates; mining and
development risks, including risks related to infrastructure,
accidents, equipment breakdowns, labor disputes, bad weather,
non-compliance with environmental and permit requirements or other
unanticipated difficulties with or interruptions in development,
construction or production; the geology, grade and continuity of
the Company's mineral deposits; the uncertainties involving success
of exploration, development and mining activities; permitting
timelines; risks pertaining to the outbreak of the global
pandemics, including COVID-19; government regulation of mining
operations; environmental risks; unanticipated reclamation
expenses; prices for energy inputs, labour, materials, supplies and
services; uncertainties involved in the interpretation of drilling
results and geological tests and the estimation of mineral reserves
and mineral resources; the need for cooperation of government
agencies and indigenous groups in the development and operation of
properties including the Josemaria Project; unanticipated variation
in geological structures, metal grades or recovery rates;
fluctuations in currency exchange rates; unexpected cost increases
in estimated capital and operating costs; the need to obtain
permits and government approvals; uncertainty related to title to
the Company's mineral properties, anticipated use of proceeds from
financings, the ability of the Company to satisfy the conditions of
the terms and conditions of the debentures issued pursuant credit
facilities, including repayment thereof upon their respective
maturity dates and the issuance of Common Shares thereunder and
other risks and uncertainties disclosed in the Company's periodic
filings with Canadian securities regulators and in other Company
reports and documents filed with applicable securities regulatory
authorities from time to time, including the Company's Annual
Information Form available under the Company's profile at
www.sedar.com. In addition, these statements involve assumptions
made with regards to the Company's ability to develop the Josemaria
Project and to achieve the results outlined in the Feasibility
Study; the ability to satisfy the terms and conditions precedent of
the Arrangement Agreement (as defined herein) in order to
consummate the Transaction (as defined herein), the ability to
obtain all necessary regulatory approvals in connection with the
Transaction in a timely manner or at all, the ability of Lundin
Mining (as defined herein) to obtain all necessary regulatory
approvals in connection with the Transaction in a timely manner or
at all, the ability to raise the capital required to fund
construction and development of the Josemaria Project; and the
results and impact of future exploration at the Josemaria Project.
The Company's forward-looking information reflects the beliefs,
opinions, and projections on the date the statements are made. The
Company assumes no obligation to update the forward-looking
information or beliefs, opinions, projections, or other factors,
should they change, except as required by law.
SOURCE Josemaria Resources Inc.