Heliostar to acquire gold portfolio of producing mines and development projects in Mexico for US$5M

Press release from Heliostar

HIGHLIGHTS:

• Strategic Acquisition of former Argonaut Gold Assets in Mexico - transforms Heliostar into a gold producer with a robust development portfolio
• Expanded Asset Base - adds two producing mines, the San Agustin Mine and the La Colorada Mine, and two advanced development projects to Heliostar’s portfolio
• Increased Resource Base - Heliostar’s measured and indicated resources grow to 3.5 million ounces of gold in addition to the Cerro del Gallo historical resource.  Acquisition cost of measured and indicated resources is less than US$1.80 per ounce of gold
• Improves Ana Paula Economics - eliminates up to US$20 million in contingent milestone payments on the Company’s flagship Ana Paula Project
• Immediate Production and Cash Flow - financial benefits from ongoing operations immediately accrue to Heliostar’s account until closing, less US$5 million in operating cash flow to FCGI prior to closing

Vancouver, Canada, July 17, 2024 – Heliostar Metals Ltd. (TSX.V: HSTR, OTCQX: HSTXF, FRA: RGG1) (“Heliostar” or the “Company”) has entered into a binding agreement (“Acquisition Agreement”) with Florida Canyon Gold Inc. (“FCGI”) to acquire (the “Transaction”) a 100% interest in all of FCGI’s mining assets in Mexico for consideration of US$5 million. The projects being acquired were recently spun out from Argonaut Gold Inc. (“Argonaut”). 

Heliostar CEO, Charles Funk, stated “This acquisition is transformative for Heliostar. The Company transitions from single asset developer to a multi-asset producer. The addition of the two producing gold mines provides cash flow to bring new production online. In addition, this transaction eliminates up to US$20 million in contingent payments on the Ana Paula project, freeing that capital for its development, which remains the Company’s focus. Further it cancels up to US$150 million in conditional option payments on San Antonio. All in exchange for a total acquisition price of US$5 million. Perhaps of most value is the addition of a strong management team in Mexico that expands our capability to deliver on Heliostar’s growth goals”.

Acquisition Details

Pursuant to the Transaction, Heliostar will acquire those FCGI subsidiaries which collectively own 100% of the following properties (the “Projects”):

• La Colorada Mine, located in Sonora, producing gold from residual leaching of gold while on care and maintenance (the “La Colorada Mine”);
• San Agustin Mine (formerly the El Castillo Complex), an open pit heap leach gold mine, San Agustin, and a closed open pit heap leach gold mine, El Castillo, located in Durango (the “San Agustin Mine”);
• Cerro del Gallo, an advanced gold development project located in Guanajuato (the “Cerro del Gallo Project”); and
• San Antonio, an advanced gold development project located in Baja California Sur (the “San Antonio Project”). 

The Company will acquire the Projects in exchange for US$5 million, payable on closing. The Transaction is expected to close in October 2024. 

As a condition to closing of the Transaction, Heliostar and FCGI will enter into an agreement eliminating (a) up to US$20 million in contingent payments, which become payable to FCGI pursuant to the agreement under which Heliostar acquired the Ana Paula Project, and (b) up to US$150 million in conditional option payments and the issuance of a 2% net smelter returns royalty on the San Antonio Project, which might have become payable pursuant to the agreement under which Heliostar acquired an option on the San Antonio Project. 

The closing of the Transaction (“Closing”) is subject to certain conditions, including approval of the TSX Venture Exchange, other consents and regulatory approvals including approval from the Mexican Federal Economic Competition Commission, and the corporate entities holding the Projects having net working capital of at least US$2 million. Closing is not subject to any financing condition. 

FCGI has agreed that that cash generated in respect of the Projects until the Closing Date, less US$5M in operating cashflow, will be for the benefit of Heliostar. 

‍Financing Details

The Company is in advanced discussions to enter a loan facility (the “Debt Facility”) for the aggregate principal amount of US$5-10 million. The Company intends to use the proceeds of the Debt Facility to fund the Transaction. Heliostar anticipates to service and repay the Debt Facility through cash flow from operations. 

Advisors and Counsel

Trinity Advisors Corporation and TSCG Capital Inc. are acting as financial advisors to Heliostar.   

Forooghian + Company Law Corporation is acting as Heliostar’s legal advisors.

‍Webinar Invitation

Further, the Company will host a webinar on July 25th at 11am Pacific/2pm Eastern Time, to provide a detailed update on the Transaction and corporate plans for 2024 and 2025. Please use the link here to register for the webinar: https://us02web.zoom.us/webinar/register/