• Mithril to acquire private Australian exploration company Sun Minerals Pty Ltd which has an exclusive Option to earn up to 100% of the high-grade Copalquin Gold Silver Project in Durango, Mexico
• Copalquin lies within the Sierra Madre gold-silver trend which hosts numerous world class gold silver mines including Coeur Mining’s Palmarejo and Agnico Eagles’ Pinos Altos mines
• Copalquin contains 32 known historic gold and silver underground mines including the La Soledad and El Refugio Mines
• Historic drilling highlights project’s exploration potential with multiple high-grade drill intercepts including;
  • 17.77m @ 45.16 g/t gold and 118.2 g/t silver from 30.98 metres in UC-03 (El Cometa Mine)
  • 7.9m @ 6.54g/t gold and 140.g/t silver from 143.10 metres in UC-024 (El Refugio Mine)
  • 4.53m @ 28.99g/t gold and 2,350.3g/t silver from 138.00 metres in MP-07-101 (La Soledad Mine) ¹
• Completion of transaction to be catalyst for change at Board and Senior Management level with Mithril’s current Managing Director to resign and Sun Minerals Nominees to be appointed to Mithril Board and a lead project management position

Mithril Resources Limited (ASX: MTH) (Mithril or the Company) is pleased to announce that it has entered into a binding terms sheet (Terms Sheet) to acquire all the issued share capital of Sun Minerals Pty Ltd (Sun Minerals).

Sun Minerals holds an exclusive option (Option) to earn up to a 100% interest in the high-grade Copalquin Gold Silver Project (Copalquin or the Copalquin Project) located in the Sierra Madre Trend, Durango State, western Mexico.  The mining concessions forming the Copalquin Project are held by Compania Minera Copalquin S.A de C.V., a Mexican domiciled entity (CMC).

1. Cautionary statement regarding exploration results

• The Exploration Results reported in this release have not been reported in accordance with the JORC Code 2012;
• a Competent Person has not done sufficient work to disclose the Exploration Results in accordance with the JORC Code 2012;
• it is possible that following further evaluation and/or exploration work that the confidence in the prior reported Exploration Results may be reduced when reported under the JORC Code 2012;
• nothing has come to the attention of MTH or the Competent Person that causes it to question the accuracy or reliability of the historic Exploration Results; but
• MTH has not independently validated the historic Exploration Results and therefore is not to be regarded as reporting, adopting or endorsing those results.

The proposed acquisition by Mithril of all issued share capital of Sun Minerals is referred to as the Transaction. A summary of the Term Sheet including conditions precedent are set out in Annexure A. The Company notes that the Transaction remains subject to a number of conditions precedent including completion of due diligence, shareholder approvals and the completion of the capital raising described below.

As a condition of the Transaction, Mithril also proposes conducting a capital raising by way of an entitlement issue to shareholders on a record date to be determined to raise approximately A$4.9 million (before costs). Funds raised from the capital raising will be used by Mithril primarily to complete a drill programme at Copalquin and to continue work on the Company’s existing projects. Further details are set out below.

SUN MINERALS OVERVIEW

Sun Minerals is an Australian entity incorporated in 2017 to hold the Option to acquire and explore Copalquin. Mithril shares issued to the shareholders of Sun Minerals (Sun Vendors) at, and subject to completion of, the Transaction will account for 40% of the expanded share capital of Mithril.

Sun Minerals holds the Option to earn up to 100% of Copalquin. A summary of the Option (as proposed to be amended to accommodate the Transaction) is set out in Annexure B.

The Sun Minerals Directors have personally invested A$2.5M in cash and time into Sun Minerals over the past two years, and have relevant technical backgrounds, having over 50 years of combined Mexico operating experience. The Sun Minerals Directors also have significant experience and success with public companies and developing gold-silver projects in Australia and overseas.

Sun Mineral’s Exploration Director (Mr Hall Stewart) and Managing Director (Mr John Skeet) both played key roles in the exploration and development of the Palmarejo Silver Gold Mine which is located north of Copalquin within the Sierra Madre Trend, which is owned and operated by North American mining company Coeur Mining Inc.

In December 2018, after 9 years of production, Coeur Mining Inc. reported Canadian National Instrument 43-101 (NI43-101) (non-JORC) compliant proven and probable reserves of 693,000 oz Au and 50.2 million oz Ag plus significant NI 43-101 (non-JORC) resources remaining at the Palmarejo complex.

ABOUT THE COPALQUIN GOLD-SILVER PROJECT

The Copalquin Gold Silver Project (6 mineral concessions – 7,005 Ha seeAnnexure D) covers the entire Copalquin Mining District within the gold-silver trend of the Sierra Madre Occidental mountain range in Durango State, western Mexico.  The gold silver trend is host to numerous gold and silver deposits, with multiple producing mines including; Coeur Mining’s Palmarejo, Agnico Eagles’ Pinos Altos, Goldcorp’s El Suazal Mine (now depleted), First Majestic Silver’s San Dimas mine, Fresnillo’s San Julian and La Cienega mines and the now closed Ocampo mine.

Figure 1:  Copalquin Project location and surrounding major mines

Within the Copalquin Project boundaries there are 32 known historic gold and silver underground mines and surface workings plus historic drill intercepts. Mineralisation is typically associated with low-sulfidation epithermal veining and stockworks developed within an andesitic host rock sequence.

Data compilation, geological mapping and rock chip sampling undertaken by Sun Minerals over the past two years indicates that gold-silver mineralisation previously mined at Copalquin was of very high-grade (refer to the “Cautionary Statement Regarding Historical Exploration Results” on pages 1 and 44 of this announcement).

Historic drilling underneath and along strike from underground workings undertaken prior to Sun Minerals’ involvement returned multiple high-grade intercepts (see Table 2) including;

• 17.77m @ 45.16 g/t gold and 118.2 g/t silver from 30.98 metres in UC-03 (El Cometa Mine)
• 7.9m @ 6.54 g/t gold and 140 g/t silver from 143.10 metres in UC-024 (El Refugio Mine)
• 4.53m @ 28.99 g/t gold and 2,350.3 g/t silver from 138.00 metres in MP-07-101 (La Soledad Mine)

It should be noted that these intercepts are historic and not compliant with current JORC Code. Please refer to Annexure F for an assessment of the reliability of the results by reference to the criteria in Table 1 of the JORC Code. Please also refer the “Cautionary Statement Regarding Historical Exploration Results” on pages 1 and 44 of this announcement).

Sun Minerals has advised the Company that it believes that the historic drilling at Copalquin was not carried out in a systematic manner with previous campaigns hindered by logistical difficulties and overly concentrated in areas where the first favourable intercepts were encountered.

Sun Minerals has obtained all statutory permits required to undertake a systematic drilling program at Copalquin and, upon satisfactory completion of the Transaction, a 4,500-metre diamond drilling program is planned to be undertaken.

The aim of the proposed drilling is to better understand the geological controls on mineralisation and demonstrate the potential for mineralisation beyond the limits of existing mined areas.

Importantly, Sun Minerals has strong “in-country” operating experience and has developed strong working relationships with local landowners, stakeholders, and contractors.

Further details regarding the Copalquin Project and the exploration plans for the Copalquin Project are set out in Annexure E.

Statements regarding the Copalquin Project are made on the basis of information and representations provided by Sun Minerals and its directors and officers, publicly available information, the preliminary due diligence enquiries of the Company and the information compiled by the competent person (refer to competent person statement at the end of this announcement). As noted above, the Transaction remains subject to a number of conditions including completion of due diligence by Mithril. At the date of this announcement, the due diligence enquiries of the Company are ongoing and further updates will be provided in due course.

ABOUT MEXICO

Mexico has a mining history extending almost 500 years and is among the world’s largest metal producers. Mexico is the largest producer of silver in the world and a top global producer of gold, copper, zinc, amongst other minerals.

With its long mining tradition, Mexico has a largely favourable environment for the industry. The geological potential remains strong. The country’s terrain is one of the most tectonically active and complex in the world. Orogenesis has pushed up mountain chains all across Mexico, including the Sierra Madre Oriental, Sierra Madre Occidental and Sierra Madre del Sur. These three regions have formed some of the key metallogenic areas. Gold and silver mineralisation is commonly linked to the two belts of hydrothermal veins and gaps that stretch out underneath both sides of the Sierra Madre Occidental.

Mexico contains outstanding geological potential for mining, which contributes to making Mexico the world’s fourth-largest recipient of foreign direct investment (FDI) for mining and the second destination of such FDI in Latin America. The majority of this FDI is directed to mining gold, copper, zinc, and uranium.  According to the Mexican Mining Chamber (Cámara Minera de México or CAMIMEX), Mexico leads the world’s production of silver. Mexico was the ninth-largest producer of gold and seventh-largest producer of copper in 2018.

CONSIDERATION AND BOARD AND MANAGEMENT CHANGES

The consideration payable by Mithril for the purchase of all issued share capital of Sun Minerals comprises an aggregate total of 673,852,281 fully paid ordinary Mithril shares (Consideration Shares), which will account for 40% of the expanded share capital of Mithril following completion of the Transaction (including full subscription of the Rights Issue).

Subject to and upon completion of the Transaction, Sun Minerals shall also have the right to nominate an individual to be appointed as a Director (Executive Chairman) of Mithril (subject to receipt of a valid consent to act and, if required, shareholder approval) and to nominate an individual to be appointed to a lead management role in Mithril in respect of the exploration of the Copalquin Project.

Sun Minerals has indicated that it intends to nominate Mr Dudley Leitch as the Executive Chairman of the Company upon completion of the Transaction. Mr Dudley Leitch has over 40 years (10 years in Mexico) developing projects and running ASX mining/exploration companies with projects in Australia, Mexico and the USA. Mr Leitch has previously been a director or managing director of Perseverance Corporation, Mogul Mining, Valdora Minerals, Kings Minerals and Bolnisi Gold.

Mithril advises that Mr David Hutton has served his notice of resignation as Managing Director, with termination of his employment as Managing Director of Mithril to occur at the earlier of: 22 May 2020, being the end of the six-month notice period under Mr Hutton’s employment agreement, or upon successful conclusion to the Transaction.

Mr Hutton and Mithril have agreed that he will continue to serve as Managing Director during the notice period until the occurrence of the earliest of the above events.

Mithril wishes to thank Mr Hutton for his years of service and his continued support of Mithril in respect of the exploration of its existing exploration projects and pursuit of the Transaction.

CAPITAL RAISING

As a condition of the Transaction, Mithril proposes conducting a capital raising by way of an entitlement issue to existing shareholders on a record date to be determined of one (1) new fully paid ordinary Mithril share for every one (1) existing fully paid ordinary Mithril share held at an issue price of A$0.01 (1 cent) per share to raise approximately A$4.9 million (before costs) (Rights Issue).

Funds raised are proposed to fund exploration of the existing Mithril projects and the Copalquin Project and otherwise to meet working capital requirements. An indicative use of funds is set out below table:

The Company will release further details regarding the Rights Issue when available.

DIRECTOR/MANAGEMENT PERFORMANCE RIGHTS

Subject to completion of the Transaction, which will necessarily require shareholder approvals, Mithril intends to issue up to 200,000,000 performance rights convertible to fully paid ordinary Mithril Shares to a combination of existing Directors and proposed incoming Directors, management and consultants (Director/Management Performance Rights).

The terms of the Director/Management Performance Rights are set out in full in Annexure C. These terms are subject to review by the ASX.

PRO-FORMA CAPITAL STRUCTURE

The indicative capital structure of Mithril following completion of the Transaction is set out below:

Convertible Securities (or rights to securities)

INDICATIVE TIMETABLE

The indicative timetable for the Transaction is set out below:

*The above timetable is indicative only and is subject to change.

UPDATE ON EXISTING MITHRIL EXPLORATION PROJECTS

Over the past months, Mithril has extensively restructured its exploration portfolio with new exploration partners introduced to sole fund exploration activities on the Lignum Dam Project, Limestone Well Project, and most recently the Kurnalpi Project. In addition, the Company has also relinquished tenements at Bangemall and Duffy Well and withdrawn from the Nanadie Well JV.

The Company retains the Billy Hills Zinc Project, where a Heritage Clearance Survey to facilitate drill testing of the Firetail Prospect was conducted in early November. In conjunction with the survey, further mapping and rock chip sampling of the prospect was also undertaken. Results from both the survey and sampling are expected within the next two to three weeks.

ENDS

For Further Information Contact:

Mithril Resources Ltd (ASX: MTH)
Adrien Wing, Non-Executive Director and Company Secretary
T: +61 3 9614 0600
www.mithrilresources.com.au

Original Article: https://www.mithrilresources.com.au/wp-content/uploads/bsk-pdf-manager/2019/11/20191125-Transformative-high-grade-gold-silver-project-acquisition-FINAL.pdf