Goldgroup Mining has entered into a binding commitment to invest $75 million in Luca Mining, supporting Luca’s proposed acquisition of the Cozamin copper-silver mine in Zacatecas, Mexico.
Goldgroup will participate in Luca’s $110 million private placement of subscription receipts, with proceeds from the financing intended to fund a portion of the cash consideration required for the Cozamin transaction.
Following conversion of the subscription receipts and completion of the acquisition, Goldgroup expects to own approximately 19.9% of Luca Mining on a non-diluted pro forma basis.
Completion of the investment remains subject to closing conditions, including approval from the TSX Venture Exchange, while the Cozamin acquisition is subject to its own regulatory and transaction conditions.
Goldgroup plans to finance the investment using existing cash, including proceeds from its recently completed $121.8 million non-brokered private placement.
Following that financing, Goldgroup reported approximately $166 million in cash.
After funding the proposed $75 million investment, the company expects to retain approximately $91 million in cash, before transaction expenses and other committed uses.
The investment replaces a previously announced $75 million equity backstop from Trafigura Pte Ltd. for Luca’s Cozamin acquisition.
Goldgroup has agreed to subscribe for either $75 million of Luca subscription receipts or an amount that results in it holding approximately 19.9% of Luca following completion of the acquisition.
Each subscription receipt will convert into one Luca common share after the applicable escrow release conditions are satisfied.
Goldgroup may also elect to convert earlier, provided doing so does not cause its ownership to exceed 19.9% or trigger a requirement for Luca shareholder approval.
The transaction also gives Goldgroup a number of governance and shareholder protections.
As long as Goldgroup owns at least 10% of Luca’s outstanding shares, it will receive certain investor rights, including the right to nominate two directors to Luca’s board, along with equity participation and anti-dilution rights, subject to applicable conditions.
Luca announced its agreement to acquire 100% of the Cozamin Mine from Capstone Copper on September 21.
The transaction includes $290 million in upfront consideration, consisting of $275 million in cash and $15 million in Luca shares.
Luca could also pay up to $95 million in additional deferred and contingent consideration, bringing the potential total transaction value to as much as $385 million.
The additional consideration includes $35 million payable on the first anniversary of closing, at Luca’s election in cash or shares, plus up to $60 million in contingent cash payments tied to higher future copper prices.
Cozamin is an underground copper-silver mine in Zacatecas that has operated continuously for approximately 20 years.
The mine includes established infrastructure such as paste-backfill and filtered-tailings systems.
For Goldgroup, the investment represents a significant deployment of capital shortly after completing the largest financing in its history.
The company raised approximately $121.8 million on September 25 and had previously stated that proceeds could be used to advance existing assets and pursue strategic investments and M&A opportunities.
Goldgroup currently owns four mining and development assets across Mexico and the United States.
Its portfolio includes the Don David Gold Mine in Oaxaca, Cerro Prieto Gold Mine in Sonora, San Francisco Gold Project in Sonora, and Back Forty Project in Michigan.
The Luca investment gives Goldgroup exposure to a producing copper-silver asset while preserving substantial cash for its existing mining portfolio and potential additional transactions.
