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First Mining Announces US$22.5 Million Agreement to Advance Springpole Gold Project

Jun 16, 2020

First Mining Gold Corp. has announced that it has entered into a funding agreement with First Majestic Silver Corp. in relation to the Company's 100%-owned Springpole Gold Project near Red Lake. Under the terms of the Agreement, First Majestic will pay First Mining total consideration of US$22.5 million for the right to purchase 50% of the payable silver produced from Springpole for the life of the Project (the "Stream"). Further details are set out below under "Silver Stream Agreement Details".

"We are excited to enhance our strategic partnership with First Majestic to fund Springpole through the completion of the Pre-Feasibility and Environmental Assessment processes", stated Dan Wilton, CEO of First Mining Gold. "This agreement is the result of a year-long process to explore non-dilutive financing alternatives with a number of different parties. This silver stream sale leverages Springpole's potential by-product revenue, strengthens our balance sheet, and provides a less dilutive source of funding to support our continued advancement of one of the largest undeveloped open-pit gold deposits in North America."

Benefits of the Transaction

  • Secures a less dilutive source of funding to advance Springpole through a key de-risking phase, with the advancement of technical studies, environmental permitting, and community consultation
  • Provides First Mining with sufficient capital to fund Springpole development through the completion of a Pre-Feasibility Study ("PFS") for Springpole and the Environmental Assessment processes, as well as corporate G&A through 2023
  • Leaves the Springpole project substantially unencumbered while maintaining robust potential cash costs and all-in sustaining costs
  • Increases strategic relationship with First Majestic to leverage their significant technical and operating expertise for the benefit of Springpole development

Silver Stream Agreement Details

First Mining's wholly-owned subsidiary, Gold Canyon Resources Inc., which owns 100% of Springpole, has entered into a definitive silver purchase agreement with First Majestic. The key terms of the Agreement are as follows:

Silver Stream

  • First Majestic will purchase 50% of the payable silver that will be produced from Springpole by First Mining for the life of the Project

First Mining Consideration

  • US$10 million on closing of the Agreement, with US$2.5 million payable in cash and the remaining $7.5 million payable in common shares of First Majestic (the "First Majestic Shares") based on the volume-weighted average trading price ("VWAP") of the First Majestic Shares on the Toronto Stock Exchange (the "TSX") for the 20 trading days up to the day immediately prior to the closing date
  • US$7.5 million upon First Mining publicly announcing the completion of a positive PFS for Springpole, with US$3.75 million payable in cash and US$3.75 million payable in First Majestic Shares (based on 20-day VWAP)
  • US$5 million upon First Mining receiving approval of a Federal or Provincial Environmental Assessment for the Project, with US$2.5 million payable in cash and the balance in First Majestic Shares (based on 20-day VWAP)
  • The First Majestic Shares shall be subject to a statutory four month and one day hold period pursuant to applicable Canadian securities laws

Buyback Right

  • First Mining has the right to repurchase 50% of the Stream for US$22.5 million at any time prior to the commencement of commercial production at Springpole

Warrant Issuance to First Majestic

  • As part of the Agreement, First Mining will issue 30 million common share purchase warrants ("Warrants") to First Majestic on the closing date. Each Warrant will entitle First Majestic to purchase one common share of First Mining at an exercise price of $0.40 for a period of five years

Future Silver Stream Cash Payments

  • First Majestic will make ongoing cash payments to First Mining equal to 33% of the lesser of the average spot price of silver for the applicable calendar quarter, and the spot price of silver at the time of delivery, subject to a price cap of US$7.50 per ounce of silver (the "Price Cap")
  • The Price Cap is subject to annual inflation escalation of 2%, commencing at the start of the third year of commercial production at the Project

Technical Committee

  • First Mining and First Majestic will form a three-member technical committee (the "Technical Committee") comprised of two members from First Mining and one member from First Majestic. The Technical Committee will advise First Mining on metallurgical testing, process flow sheet development and through the completion of PFS and Feasibility studies for Springpole, leveraging First Majestic's operating experience, intellectual property, and infrastructure

Other Details

  • First Mining has granted a right of first refusal to First Majestic with respect to any future silver stream financings for Springpole


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