Welcome to the Equinox Gold Conference Call to discuss their acquisitions of the Mesquite Gold Mine. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity I would now like to turn the conference over to Lynn Bailey, Vice President, Investor Relations, from Equinox
that we will be making a number of forward looking statements about the Mesquite Gold Mine and, Equinox Gold's long term plan. So please do take a moment read the cautionary statements and also to look at our continuous disclosure documents that are filed on SEDAR. I'll now turn the conference over to our CEO. Please go ahead.
Thanks, Arlene, and welcome to everyone. We're really excited to be here to discuss the acquisition of the Mesquite Gold Mine today. With me, I have David Lang, the Chief Operating Officer and Peter Hardy, the Chief Financial Officer. We'll run through the presentation and then open up for questions and answers at the end here. We're really thrilled to be adding Mesquite to our portfolio and it'll bring immediate gold production from permitted operation in a great jurisdiction being California where we already have the Castle Mountain project.
It's a perfect fit for Equinox right now at this stage of growth. We've been diligent and disciplined in looking at for our next step in delivering on our strategy and that growth strategy has been well articulated since the beginning of the year. And this really is the 3rd leg to that stool. We're thrilled to be welcoming as well, the Mesquite team into the Equinox story. We know even a few of those people from the days before when I was at new gold in 2007 onwards for a few years.
We're really excited to be adding them into the team, leveraging off of all of our experience in California and their experience in California. So Looking at Slide 2 and the acquisition, a quick overview. So that adds the immediate production here of about 140,000 or 50,000 ounces And next year with Aurizona going into production, we'll have another sort of 130,000 to 40,000 ounces of production on a run rate basis. The immediate cash flow from Mesquite is exciting to add into our profile right now. We're adding a long term stable producer based in California, great jurisdiction.
And really, this acquisition is a catalyst for our repositioning. Will become an immediate producer right away to this month or in a couple of months here when we've completed the acquisition. It accelerates our growth towards the 500,000 ounce of annual production, which is a 20% dilution in our shares. We'll be adding 25% to our 2P reserves. We'll be adding 40% to our M and I resources in a low risk operating jurisdiction.
The acquisition is about $160,000,000, $158,000,000 to be precise and it's funded through debt and equity, which we'll discuss a little bit later, which is fully subscribed for. And we really do want to thank our core shareholders for supporting us in this acquisition and we'll discuss the detail of that as we go through as well. This is a transformative acquisition. It's accretive across all metrics. And there are some opportunities for some upside operational improvements and some exploration potential here that we'll elaborate on as we go through as well.
So we're advancing the strategy, even in this weak gold market environment We don't want to stand still. We've been very clear at the beginning year with Ross Peter, our new Chairman, that we want to become a growth company and become a mid tier to a major gold producer here over the next few years. So this is the first step. Turning on to slide 3 just gives you a bit of a pictorial. The graph really illustrates here that we're immediately into production here with Mesquite.
Arizona into production. So the run rate production over the next year is basically almost 2,300,000 ounces of gold production on an annual basis. And it moves us a long way towards that 500,000 plus ounce goal that we have. And obviously, if you add Castle Mountain in early 2020, be adding almost another 50,000 ounces right away to get us over 300,000 ounces. Looking at the transaction summary in a little more detail here to a pretty straightforward transaction.
It's a private deal. The price we mentioned is just under $160,000,000 in cash. We're acquiring the shares of Sidjuri that holds Mesquite mines. The funding is $120,000,000 of debt plus $75,000,000 of equity, which again, we've said is fully subscribed and we'll a little more detail in a minute here. Closing expectation is in quarter 4, hopefully in October or towards the end of October, but quarter 4 this year.
And conditions to closing are fairly straightforward. We need to complete the acquisition funding. There's the customary regulatory and other approvals, but there's no shareholder votes on either side, so fairly straightforward. Turning over to Slide number 5 here, I'm going to turn it over to David to run through the Mesquite and then I'll conclude with the transaction overview.
Good morning all. Just a little overview of the Mesquite mine, as I'm sure a lot of you are aware, it's an open pit run of mine heap leach operation in Southern California. It's been operating since 1985 producing 4,000,000 ounces of gold. It has obviously a proven operating team and a long history and well understood and attractive cost structure. 10 year history is an average of 135,000 ounces a year.
$8.70 an ounce all in sustaining. The 2018 guidance from New Gold is 100 and 40,000 to 150,000 ounces for the year at between $1000 $10.50 all in sustaining. Interestingly, the first half of this year production has certainly met that at 65,000 ounces and the all in sustaining cost is rather lower than guidance, which is good. We're very happy, happy to see that. And the picture shows us really the nice layout of the operation.
You see the leach pads at the bottom. And the colored blobs are the various sources of ore that we will be mining over the next 3 years. There's a number of interesting operational synergies that we have with Mesquite and Castle Mountain. Which we're looking forward to enjoying. I mean, we're in a great location, stable, stable, low risk, mind jurisdiction.
We're 200 Miles South of Castle Mountain, so it's not too far. It strengthens our regional presence, which is very helpful in dealing with with the various regulatory authorities, which is the next point that really we have a lot of synergies on that side. And it's a similar scale. Castle Mountain And Mesquite are very similar in many, many ways about kind of mine. Total production from both of them will at steady state will be 60,000,000 tons a year.
The oil will be 14,000,000 to 16,000,000 tons a year. They're very, very similar in size. Obviously, we're getting a very experienced team at Mesquite in terms of rudder mine heap leaching. And extensive experience of operating in California, which is going to be very useful to us as we move customatic. Forward.
Other interesting benefits is that we get enhanced purchasing power. So when we go to, to suppliers, particularly at consumables, but also some of the equipment suppliers will be getting, some interesting leverage to get some good pricing out of them. We've got some long term opportunities for the combined workforce, and we're looking at the opportunity to transfer some equipment at some point. Between the operations if that gold resource and reserve. We've got 1,100,000,000 dances of 2P reserves coming our way.
With an additional 1,200,000 ounces of M and I. So that's pretty quite substantial, 25% increase in reserves and the 40% increase in in resources. So we're really happy to see that coming on to our books. And the next slide is really the history of the steady state gold production. We've had, I've seen, this is early since 2008.
When the operations restarted, the operation is obviously much older going back to 95%. But it's a pretty steady producer. And it's been pretty steady on its costs. So we're looking forward to keeping that going. And it's important that they're well established in the community good relationships with the local community and with local regulators and so on, which we build on.
And I already touched on the next slide, really, we're increasing our reserves and M and A. Resources, which is a very happy situation to take our reserves from 4,500,000 ounces to 5,700,000 is a very, very nice move. Obviously, to take our resources from 5.8to8.1000000 ounces is absolutely great.
And then I'll turn it over to Christian to talk about repositioning. Yes, thanks, David. Looking at slide number 10 here, putting it all back into perspective, this transaction really does reposition Equinox in the sector. You can see, we definitely moved to the left on this graph. We're pretty excited to be adding the resource and reserve base and it moves us up that curve here.
And then we have 3 legs to that stool as I mentioned earlier. As well, there's lots of potential to continue to grow that reserve and resource base. The two assets that we currently have in Arizona and Castle Mountain have lots of potential upside, which we've alluded to in other presentations. So, We continue to see ourselves with an ability to move to the left on this graph and translating that into a value here. There's a significant increase in the enterprise value and the net asset value in the bottom.
And again, it moves us starting to move into that sort of intermediate mid tier sort of sector space. So nicely moving along to the left that over $500,000,000 now U. S. Dollars in enterprise value. Slide number 11 gives an idea of what this sector repositioning could translate to, and what do we expect from it.
So the benefits of this diversification with the addition of Mesquite. Certainly, we hope will translate into that 3rd leg of the stool, the asset diversification, the jurisdictional diversification and ultimately being a gold producer here. So the real potential is for a rerate. We've been trading in that sort of 0.5 NAV multiple, which is fairly typical of the junior developers. And now we expect certainly to be moving up that curve 2 mines into production next year as Aurizona comes into production as well.
So that intermediate gold producer status certainly is well within reach in the near term here. Looking at slide number 12 and bring it to more of a conclusion here, what are the transaction sources and uses that I referred to earlier? This lays it out in a little more detail. So basically there's a $100,000,000 credit facility from Scotia. We're really pleased to be welcoming Scotia to the group and just as a big supporter of us.
They'll be putting in place a more traditional $100,000,000 credit facility with a LIBOR plus 3% to 4% interest rate. It's a 4 year term with quarter 6 monthly payment holiday to start and then quarterly installments thereafter. As well, Sprott continues to support us. Obviously, they are the the lender on the Aurizona side and they brought to the table a $20,000,000 credit facility here at a LIBOR plus 6.5 percent with repayment beginning in December 2020, so further out in the future. We certainly expect to see our our debt and our, credit facility evolve over time as we become a producer, it certainly will give us more flexibility for refinancing in the future.
And bringing in a more traditional revolving credit facility debt structure in due course as well. So we've had very strong debt and equity support equity financing piece is about $75,000,000, $50,000,000 of that is on a non brokered equity financing, which is fully subscribed. Ross Beatty is participating along with other existing shareholders such as Richard Ward and Lucas Lundin and even some new institutional shareholders will be coming into the fold here. So Ross Richard and the other key shareholders will be stepping up for about $25,000,000 or so of that financing. So really excellent report.
Really appreciate that. The offering price is $0.95. And the brokered equity finance will be on the same basis. It'll be $1,000,000 led by Scotia and Vimeo to bought deal private placements. And in terms of the use of funds there on right hand side, the purchase price is about $160,000,000.
We'll be supporting a reclamation bond that we'll be transferring across from new gold. Our expectation is about $12,000,000 to $13,000,000 to support that. As well, there'll be some working capital available for the mine of sort of $5,000,000 to $10,000,000 fees of $5,000,000 and some other working capital available for other activities such as drilling and that's So that's the total of $195,000,000 of financing being raised. Looking at 'thirteen, what does this look on a pro form a basis for the corporate structure? The key items to note here are the basic shares outstanding and other 100,000,000 shares will be issued here.
So it's only about or it's less than 20% of our current shares outstanding. So we'll be adding very significant resource and operator to our base for issuing issuance of less than 20% of our shares. So we're really excited that. We're trying to be very disciplined with our issuance of shares and equity as we move forward here. Dollars Canadian mark just under that at $5.75.
In terms of cash and debt on a pro form a basis, closer to $100,000,000, on a cash of cash and the drawn debt will be about $175,000,000. And again, I think with this acquisition and with the Arizona coming into production next year in Castle, year after that. We certainly will have the ability to refinance the overall debt structure and simplify it and put in place a more traditional revolving credit facility type structure in due course. So this provides us with the flexibility and liquidity we need. Also, brings us closer to potential index inclusion, inclusion and some further liquidity we hope as we move past that $500,000,000 mark in terms of market cap.
Turning on to the final slide here on Slide 14, Mesquite will be one of the building blocks of Equinox here going forward. We've come a long way in the last 9 months. Remember back to late 2017 when basically Equinox was formed through the three way merger, a lot has happened in that time. We've spun out the copper assets. We've sold Coricancha.
We've continued to build Aurizona and we've delivered on the acquisition that said we would do early in the new year. And we think this is a really good opportunity to buy a good mine at a reasonable price on a NAV basis. It's in a permitted It's permitted. It's in a good jurisdiction and we're really excited to be adding that skill base down in California where we plan to be a big player in the Western U. S.
For years to come. Disciplined execution of this growth strategy is continued on since year end. And we're really on our track on our way and this is a major step towards becoming major gold producer, which is our long term gold strategy here. So this overnight transformation from a development company to gold producer brings us immediate cash flow generation from the 140,000 to 50,000 ounces that Mesquite will bring. We've talked about the improved gold gold profile with the increase in reserves and resources already, but it really is a significant increase with for limited dilution.
This fast tracks us on our goal to achieving the 500,000 ounces plus a year of gold production in the next few years as we grow the company. David mentioned all the operational synergies that we expect to get down in the Western U. S. There. I won't highlight those again.
And it really does start reduce the risk profile and diversify out the asset base with our 3rd cornerstone asset here in a low geopolitical risk jurisdiction. Overall on the acquisition, all items or all transaction metrics are accretive. We're really excited to be adding this mine into the fold. And we really think this is on a limited dilution basis. So we really are excited to be moving forward here.
And, over the next few months, We're working hard to close this transaction, adding it into the fold before the new year and really working with the team down at Mesquite to look at all those abilities, the ability to work together with our Castle Mountain team as we ramp that up over the next year. So that brings to the formal part of our presentation. I'll flip on to 15 as we move towards the question and answer session here. So, thanks for joining this morning.
So operator, if you could please remind people how to ask questions, and then we'll start taking questions on the phone and for people online.
Certainly. You. Questions.
You received a few times now. So what sort of levels of production are you expecting from Mesgate next year and going forward?
We're talking, based on the guidance that we have seen from New Gold, we're looking at $165,000. Ounces, yes, 140,000 ounces a year is where we're looking at for it based on the guidance. That we've seen from your note.
We're certainly looking at more of the same of what we've seen over the last sort of 5 to 10 years and that fairly consistent production profile in that sort of range. So Okay.
We can take the question from the phone please.
Thank you. Our first question comes from Raul Paul with Canaccord Genuity. Please go ahead.
Hi everyone. Congratulations on the deal. Christian, could you talk about some of the tax synergies, are you able to utilize any tax losses at Castle Mountain to lower taxes at Mesquite in the near term? Would you expect to pay meaningful cash taxes from Mesquite in the next few years?
Thanks, Raul, for the question. I'm actually going to let Peter answer that one. Hey, Roe. We do expect to be able to use tax synergies and U. S.
Consolidated group for tax reporting purposes. As a result of the acquisition, as to modeling out data, the total, taxes payable over the coming years, we are frankly early in our tax structuring process, but we, we absolutely do intend to utilize the advantageous tax reporting structure that the U. S. Allows there.
Perfect. Thanks. And then, I'm also wondering, David or Christian, if you could talk about the exploration upside at Mesquite. I'm particularly interested in whether you see any opportunities to grow reserves within the current footprint that is permitted for mining?
We certainly see some opportunities there It's a little bit early to say exactly what's what they are, but we are looking at, at certainly some opportunities in there. An absolutely within the current footprint. But yes. Great. Thanks.
All right. I've got a 3 part question from investor in Bulgaria. Pete, there's about $113,000,000 plan for mine equipment at Castle Mountain based on your pre feasibility study. Do you think you can decrease any of that by using the equipment from Mesquite?
It's saying we'll certainly be looking at closely. I can't, I clearly can't tell you whether we will or not at this particular juncture. But we're always looking for opportunities to be smart about how we use capital and purchase and acquire equipment.
And is there any opportunity to affect to decrease your operating costs at Castle Mountain through the Mesquite acquisition?
I don't see any obvious ones yet. Other than the purchasing power that we get from having 2 operations, where we have an opportunity to reduce, particularly on the conceivable side, the prices that we pay for our consumables because we're basically doubling our purchasing of them.
And there
may be some G and A opportunity as well where we're dealing with the regulators and our reporting and that structure certainly probably get some benefits having 2 operations within two hundred miles of each other.
And last question, do you see any opportunities to extend the mine life at Mesquite with exploration or other upside?
Yes. The same as with Raul has a question. Yes, you certainly see an opportunity and
it's something that we're going to be digging into, pardon the pun. But certainly it's something we want to explore and see what's there. Certainly when we looked at this acquisition, we looked at on a sort of stand alone basis at the moment with what's there, what's in reserve and resource. So we didn't factor in the upside or that opportunity. Something we will look at as we get closer to the operation.
Just a follow-up on that question from a Canadian investor. What do you anticipate for the current mine life based on what you've got right now?
But talking about, excluding the rinse and trickle on trickle down leaching, we're talking about 4 years. So with the carry on leaching, we're talking about another 2 to 3 years on top of that. And then in terms of what we might find and how we might expand the reserves, then it's really hard to say, but it's
And there are another 1,000,002 ounces in resources. Certainly, we expect to be looking at. And if higher gold prices certainly come back into play, there's a great tuning there as well. So we're looking at sort of 6 to 8 year runway at the moment.
Another Canadian investor. Do you expect to take steps now to graduate to the TSX?
Yes. Well, we certainly, I think we may be one of the largest companies on the TSX fee. Certainly, we would consider that in due course here as we move forward. It would make some sense.
Another Canadian investor, are you still looking to acquire more assets this year and next year?
You know, as we've said at the beginning of the year, and I think, Ross Petey has been very vocal about this in his presentations as well. You know, our goal here has become a major goal producer. And we've now got three legs of that stool, lots of upside within the portfolio, but we will continue to look. And a certain sense, we do enjoy this sort of weaker gold market where there are opportunities here to continue to add to the profile. Our goal is to create, as Ross said, something along the lines of a Pan American Silver with multi assets, multi jurisdictions over the next 3 years, I kind of look at it as well sort of a comparable basis to an Endeavour mining, which is 4 or 5 mines with a nice development project in the pipeline.
So that's our goal. We will have to acquire at least 1 or 2 more along the way. But we're going to stick with the disciplined approach for the right price and the right timing. We will buy something, but we're certainly not going to go out and throw our equity around at the wrong prices. So we're going to be very disciplined as we look forward.
Is no more questions on the phone and no more questions online. So I guess you can give us your closing remarks.
All right. Well, thanks everyone for joining, particularly those of you on the West Coast of this early hour in the morning. We're totally thrilled here to be buying the Mesquite mine. It's a great mine in the Western U. S.
Fits in perfectly with our portfolio and strategy. And we're really excited to be adding the team from Mesquite into the fold here in the next couple of months. So please watch the space. We'll have lots of news out in the next 6 months as we continue to
This concludes today's conference call. You may disconnect your lines.