Americas Gold and Silver announces joint venture with Galena Complex

TORONTO, ONTARIO — Americas Gold and Silver Corporation, a growing North American precious metals producer, announced on Monday a strategic joint venture agreement (the “Agreement”) with Mr. Eric Sprott to recapitalize the mining operations at the Galena Complex, located in the Silver Valley of Northwest Idaho.

The strategic joint venture — expected to be 60/40 Americas/Sprott respectively — will allow Americas to increase development, modernize infrastructure, purchase new mining equipment and target exploration below current operating areas with the goal of positioning the Galena Complex to significantly increase resources, production and reduce operating costs at the mine over the next two years.

Effective Oct. 1, Mr. Sprott through 2176423 Ontario Ltd., a corporation which is beneficially owned by him, will initially commit up to $20 million to fund capital improvements and operations for the first year to earn a 40 percent interest in the company’s Galena Complex. Americas will invest an additional $5 million to fund further capital improvements in 2020.

After the first year of operations under the agreement, the parties will revert to their percentage ownership interests to fund capital projects and operations as required in proportion to those interests.

Oversight of the joint venture will consist of two nominees from Americas and one nominee by Sprott. Americas will continue to manage the day-to-day operations so long as it retains an interest in the joint venture.

“We are thrilled to partner with Eric Sprott on this joint venture. He is already the single largest shareholder in Americas; with this new venture, we are further solidifying our relationship with him,” said Darren Blasutti, president and CEO of Americas Gold and Silver. “We look forward to putting his significant investment into developing the Galena Complex to benefit all our stakeholders in the coming months and transforming the Galena Complex into a leading U.S.-based, profitable silver producer.”

Due to low silver prices and limited capital available from the capital markets for silver operational improvements since 2012, Americas has spent minimal funds at the Galena Complex to replace worn equipment, update aging infrastructure, stope development and exploration. Americas is currently allocating all its available capital to re-start the Relief Canyon mine in Nevada, which is scheduled to begin producing gold in late fourth quarter. The Relief Canyon mine is targeted to increase the company’s precious metal production by approximately 500% by 2021. In 2017 and 2018, the company focused available capital on developing the San Rafael mine in Mexico, which this year became a significant free-cash flow generating asset.

The Galena Complex possesses significant operational optionality and leverage to silver prices. The mine has between 1,250 and 1,500 tons of daily milling capacity though it is currently processing only 500 tons per day, five days a week. It produces between 0.8 M to 1.0 M silver ounces annually at high costs as a result of lower throughput, reduced operational flexibility and old equipment. The current proven and probable silver reserve includes 12.4 million ounces, a further measured and indicated silver resource of 27.4 million ounces and an inferred silver resource of approximately 39.0 million ounces (exclusive of lead and copper resources). Though this operational base is a strong starting point for comparable silver mines, a capital redevelopment of the asset is required to best exploit the existing resources, improve operational performance, and capitalize on expected higher silver prices. Further, Americas and Sprott believe there are substantially more silver resources to be discovered at better grades along extensions of existing veins and at depth.

Americas believes that the significant investment and joint venture announced today with Sprott will allow the parties to develop the Galena Complex into a long-term, profitable mine, including to take full advantage of the recent move in silver price. The company needed an outside partner who not only shared the same vision for the current upside and leverage embedded at the Galena Complex, but was willing to commit capital to systematically explore for deeper level, high-grade targets that may transform the mine into an important silver producer in the medium to long-term. Further, with the only operating mine in the Silver Valley, the joint venture will be well-positioned to take advantage of any consolidation opportunities which may evolve in the district.

Other material provisions of the agreement include: standard dilution if a party does not contribute its proportionate share of costs; penalty dilution if a party defaults in contributing its share of costs; a party’s interest in the joint venture is converted to a 5% net proceeds interest if that party’s percentage interest falls below 10%; and each party has a pre-emptive right to acquire the other party’s interest should that party desire to sell its interest in the joint venture.

Medalist Capital Ltd acted as financial adviser to both parties with respect to the transaction.

For further technical information on the Galena Complex, please see the applicable NI 43-101 Technical Report available at www.sedar.com and the company’s website at www.americas-gold.com.