Pursuant to the asset purchase agreement dated Dec. 7, 2022, as amended on May 29, 2023, and Aug. 14, 2023, among the Golden Tag Resources Ltd., First Majestic Silver Corp. and First Majestic Plata S.A. de C.V. (FMP), the company has completed the acquisition of a 100-per-cent interest in the La Parrilla silver mine complex located in San Jose de la Parrilla, Durango, Mexico, as described in the company’s news releases dated Dec. 7, 2022, April 14, 2023, May 30, 2023, and July 19, 2023.

Greg McKenzie, president and chief executive officer of Golden Tag, said: “Today is an exciting day for Golden Tag as we acquire the past producing La Parrilla silver mine complex. We now have two very high-quality silver projects located in close proximity to each other within Durango state. The La Parrilla processing plant has the capability to support both projects. We would like to welcome our new team members in Mexico, and First Majestic as our newest and largest shareholder.”

Highlights:

 

• La Parrilla is a fully permitted former producing mine complex consisting of five underground high-grade silver mines, and an open pit.
• Demonstrated history of replacing resources — operated continuously from 2004 until September, 2019, when it was placed on care and maintenance due to low silver, zinc and lead prices.
• Under First Majestic ownership the mill produced 34.3 million (M) ounces (oz) of silver equivalent (AgEq), with average annual production of approximately 2.96 Moz of AgEq.
• Excellent infrastructure inclusive of a 2,000-tonne-per-day (tpd) processing facility (1,000 tpd flotation and 1,000 tpd cyanidation circuits), dry stack filter plant with approximately nine years of tailings capacity available, numerous buildings including a dore refinery, and a partial underground mining fleet indicated mineral resources are estimated at 5.19 Moz AgEq and inferred mineral resources are estimated at 10.33 Moz AgEq.
• Located only 45 minutes from Durango City, paved highway to site.
• Large, underexplored land package totalling 69,478 hectares.
• First Majestic has become the largest shareholder of Golden Tag, now owning approximately 40.8 per cent.

 

Transaction overview

As consideration for the transaction, the company issued 143,673,684 common shares of Golden Tag to First Majestic. Additional deferred payments of up to $13.5-million (U.S.) comprise the following:

 

1. $2.7-million (U.S.) on the earlier of 18 months postclosing, or upon receipt of certain approvals from the Mexican government;
2. $5.75-million (U.S.) when either (a) five million ounces of AgEq reserves are declared from the La Parrilla claims, or (b) 22 million ounces of AgEq of measured and indicated resources are declared, from the La Parrilla claims;
3. $5.05-million (U.S.) when a new zone is discovered on the La Parrilla claims inclusive of a National Instrument 43-101 resource of 12.5 million ounces of AgEq;

 

Both II and III are payable in cash or common shares, at the election of Golden Tag.

The company received written consents from shareholders holding a majority of the issued and outstanding shares of Golden Tag approving the creation of First Majestic as a new control person (as such term is defined under the policies of the TSX Venture Exchange). Such written consent satisfied the Golden Tag shareholder approval requirement of the TSX-V.

In addition, concurrently with closing, Golden Tag and First Majestic have further amended the asset purchase agreement to reduce Golden Tag’s minimum required financing to gross proceeds of $6.8-million.

Subscription receipt financing

The company raised approximately $7.0-million pursuant to a subscription receipt offering as described in the company’s news releases dated March 30, 2023, April 14, 2023, and May 30, 2023.

Immediately prior to the completion of the transaction, in accordance with their terms, each subscription receipt of the company issued pursuant to the offering was exchanged for one common share of the company and one-half of one common share purchase warrant with each warrant exercisable into one common share at an exercise price of 34 cents until Aug. 14, 2026. The net proceeds of approximately $6.8-million were released from escrow and will be used to finance drilling and exploration programs at La Parrilla, holding costs, technical studies to support eventual restart, transaction costs, and for working capital and general corporate purposes. Holders of subscription receipts are not required to take any action in order to receive the underlying common shares and warrants.

In connection in the offering, the company agreed to pay certain eligible arm’s-length parties who introduced subscribers to the offering: (1) up to 7 per cent cash fees, and (2) up to 7 per cent finders’ warrants. The finders’ warrants entitle the holder to acquire one common share at a price of 20 cents until Aug. 14, 2025. The finders for the offering and their fees paid include: Canaccord Genuity Corp. ($48,790 cash and 242,700 finders’ warrants); PowerOne Capital Markets Ld. ($48,200 cash and 241,000 finders’ warrants); Hampton Securities Ltd. ($20,300 cash and 101,500 finders’ warrants); Red Cloud Securities Inc. ($11,100 cash and 64,750 finders’ warrants); CM-Equity AG ($4,200 cash and 21,000 finders’ warrants); and BMO Nesbitt Burns Inc. ($1,400 cash).

The common shares and warrants are subject to a four-month-plus-a day hold period from their date of distribution in accordance with applicable securities law. The warrants will not be listed for trading.

Following completion of the transaction and offering, Golden Tag now has 395,815,860 common shares outstanding.

In addition to the consideration shares, First Majestic acquired 18,009,000 subscription receipts pursuant to the offering. All of these subscription receipts will be converted to common shares and warrants effective Aug. 14, 2023, in connection with the closing of the transaction. Following completion of the offering and conversion of the subscription receipts, First Majestic will own and exercise control or direction over 161,682,684 common shares and 9,004,500 warrants, representing approximately 40.8 per cent of the issued and outstanding common shares on a non-diluted basis and approximately 42.2 per cent of the issued and outstanding common shares on a partially diluted basis (assuming the exercise of all warrants held by First Majestic).

Qualified person

In accordance with NI 43-101 — Standards of Disclosure for Mineral Projects, Bruce Robbins, PGeo, is the qualified person for the company and has validated and approved the technical and scientific content of this news release.

About Golden Tag Resources Ltd.

Golden Tag Resources is focused on advanced stage silver projects located in Durango, Mexico. Golden Tag recently completed the acquisition of the La Parrilla silver mine complex, a prolific complex which comprises five underground mines and a past-producing open pit that collectively produced 34.3 million silver equivalent ounces between 2005 and 2019. The company also holds the San Diego project which is among the largest undeveloped silver assets in Mexico.

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