Kinross invests in Revolution Resources

Just a few short months since acquiring all of Lake Shore Gold’s (LSG-T, LSG-X) assets in Mexico, Revolution Resources (RV-T) has reeled in Kinross Gold (K-T, KGC-N) as a new shareholder.

Stating that its investment in Revolution is part of a strategy “to increase its exposure to quality exploration opportunities by investing in junior resource companies,” Kinross announced it has subscribed for 3.57 million units of the junior in a non-brokered private placement.

Each unit is made up of one common share and one-half of one share purchase warrant. (Each whole warrant gives Kinross the ability to acquire one common share of Revolution at a price of $0.125 over a two-year period. After the private placement Kinross will own 9.67% of Revolution’s outstanding shares, and 11.67% on a fully diluted basis. The subscription price for the units was $0.07 per unit for a total purchase price of $249,999.96.

Insiders of the company also subscribed in the private placement for a total of 25% of the financing, including president and chief executive Aaron Keay, who acquired a total of an additional 1.43 million units.

Revolution has over 4,000 sq. km in Mexico and a significant portfolio that could have taken the company years to amalgamate through carefully and strategically doing deals were it not for Lake Shore Gold’s decision to sell the properties earlier this year in order to focus on its Canadian assets.

In that transaction Lake Shore Gold received 20 million shares of the Vancouver-based junior explorer, royalty interests of between 2% and 3.5% on four different Mexico projects and $5 million in cash or shares by the end of 2017. When the transaction closed, Lake Shore owned 26.7 million shares, or 22.7% of Revolution. Currently shareholders in the company include Sun Valley Gold (10%), management (10%), and a basket of smaller funds and institutions (15%).

At the time of the transaction with Lake Shore Gold in late January, Aaron Keay, Revolution’s president and chief executive, told The Northern Miner that he had already fielded calls about its Mexican portfolio and that the calls ranged from household names from the senior side looking at potential joint-venture option agreements, to private Mexican miners looking for mill feed.

Among the properties Revolution acquired from Lake Shore Gold was the Universo property, which stretches 100 km in length and 35 km in width and is surrounded to the north by Goldcorp’s (G-T, GG-N) Camino Rojo gold-silver deposit and the Penasquito gold-silver-lead-zinc mine.

To the south is Grupo Mexico’s Charcas zinc-copper mine, Mexico’s largest zinc producer, and 100 km further to the south is New Gold’s (NGD-T) Cerro San Pedro gold-silver mine. To the east lies First Majestic Silver’s (FR-T, AG-N) Real de Catorce silver project. 

The second property Revolution acquired in the transaction is located on the Montana de Oro project, 25 km south of Coeur D’Alene Mines’ (CDM-T, CDE) Palmarejo mine, and 20 km north of Pan American Silver’s (PAA-T, PAAS-Q) Alamo Dorado mine. The third property contains the La Bufa project, 30 km east of Goldcorp’s El Sauzal mine and is centred on the historic Carmen copper-gold mine.

“The Kinross investment is significant in the sense that it demonstrates their belief obviously in the deal we have re-negotiated in Mexico,” Keay writes in an email response to questions.  “In the current market environment, which is challenging from top to bottom for miners and explorers—closing on financings of any size is tough. Traditional institutional financings are not there, so pursuing the non-conventional methods for raising capital is one alternative route. We have a good relationship with Kinross and I think their belief in our technical abilities would be a big reason for their continued support.”

Beyond that, Keay adds, as Revolution pursues the project generator model with its Mexican portfolio, the investment by Kinross “is good validation for the company and gives us the runway to hopefully work on and negotiate the “right deal” and not a rushed deal because of market conditions we cannot immediately control.”

At presstime in Toronto Revolution was trading at 9¢ per share within a 52-week trading range of 6.5¢-26.5¢. The junior has about 99 million shares outstanding.