Thank you for standing by. This is the conference operator. Welcome to the Equinox Gold conference call to discuss their acquisition 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 to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. If you are participating online, you can submit a question using the Ask a Question tab on your screen. I would now like to turn the conference over to Rhylin Bailie, Vice President, Investor Relations for Equinox Gold Corp. Please go ahead.
Thank you very much for joining us this morning. I just wanted to remind everybody that we will be making a number of forward-looking statements about the Mesquite Gold Mine and Equinox Gold's long-term plan. Please do take a moment to 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, Rhylin. 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 Laing, the Chief Operating Officer, and Peter Hardie, the Chief Financial Officer. We'll run through the presentation, then open up for questions and answers at the end here. We're really thrilled to be adding Mesquite to our portfolio. It'll bring immediate gold production from a 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. That growth strategy has been well articulated since the beginning of the year. This really is the third 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. Looking at slide two and the acquisition, a quick overview. That adds the immediate production here of about 140,000 or 150,000 ounces. Next year with Aurizona going into production, we'll have another sort of 130,000-140,000 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, a great jurisdiction. Really this acquisition is a catalyst for our repositioning.
We'll 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 ounces of annual production, which is our target over the next couple of years here. As well, it improves our gold profile. For about a 20% dilution in our shares, we'll be adding 25% to our 2P reserves. We ought to be adding 40% to our M&I resources in a low-risk operating jurisdiction. The acquisition is about $160 million, $158 to be precise, and it's funded through debt and equity, which we'll discuss a little bit later, which is fully subscribed for. We really do want to thank our core shareholders in 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. 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 of the year with Ross Beaty, 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. This is the first step. Turning on to slide three, just gives you a bit of a pictorial. The graph really illustrates here that we're immediately into production here with Mesquite. We'll be bringing Aurizona into production, so the run rate production over the next year is basically almost 300,000 ounces of gold production on an annual basis.
It moves us a long way towards that 500,000-plus ounce gold that we have. Obviously, if you add Castle Mountain in in early 2020, you'll 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. It's a pretty straightforward transaction. It's a private deal. The price we mentioned is just under $160 million in cash. We're acquiring the shares of subsidiary that holds Mesquite mines. The funding is $120 million of debt plus $75 million of equity, which again, we said is fully subscribed, and we'll give a little more detail in a minute here. Closing expectation is in quarter four, hopefully in October or towards the end of October, but quarter four this year. 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 five 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 million ounces of gold. It has obviously a proven operating team and a long history and a well understood and attractive cost structure. 10-year history is an average of 135,000 ounces a year at $870 an ounce, all-in sustaining. The 2018 guidance from New Gold Inc. is 140,000-150,000 ounces for the year at between $1,000 and $1,050 all-in sustaining.
Interestingly, the first half of this year, the 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 to see that. The picture shows us really the nice layout of the operation. You can 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 few years. There's a number of interesting operational synergies that we have with Mesquite Mine and Castle Mountain, which we're looking forward to enjoying. We're in a great location, stable, low risk mining jurisdiction. We're 200 mi south of Castle Mountain, so it's not too far.
It strengthens our regional presence, which is very helpful in dealing with the various regulatory authorities, which is the next point that really we have a lot of synergies on that side. It's a similar scale. Castle Mountain and Mesquite Mine are very similar in many ways. They're both kind of mine. Total production from both of them at steady state will be 60 million tons a year. The ore will be 14 million tons-16 million tons a year. They're very similar in size. Obviously, we're getting a very experienced team at Mesquite Mine in terms of run-of-mine heap leaching and extensive experience of operating in California, which is going to be very useful to us as we move Castle Mountain forward. Other interesting benefits is that we get enhanced purchasing power.
When we go to suppliers, particularly of 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 makes sense. As Christian Milau already alluded to, it's a substantial gold resource and reserve. We've got 1.1 million ounces of 2P reserves coming our way with an additional 1.2 million ounces of M&I. That's really quite substantial, a 25% increase in reserves and a 40% increase in resources. We're really happy to see that coming onto our books. The next slide is really a history of the steady state gold production. We've had a scene, this is certainly since 2008 when the operations restarted.
The operation is obviously much older, going back to 1995. It's a pretty steady producer, and it's been pretty steady on its costs. We're looking forward to keeping that going. It's important that they're well established in the community. They've got good relationships with the local community and with local regulators and so on, which we will build on. I already touched on the next slide, really, we're increasing our reserves and M&I resources, which is a very happy situation to take our reserves from 4.5 million ounces to 5.7 million ounces is a very nice move. Obviously to take our resources from 5.8 million ounces to 8.1 million ounces is absolutely great. I'll turn it over to Christian to talk about repositioning.
Yeah. Thanks, David. Looking at slide number 10 here, putting it all back into perspective, this transaction really does reposition Equinox in the sector. As 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. We have three 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 Aurizona and Castle Mountain have lots of potential upside, which we've alluded to in other presentations. We continue to see ourselves with an ability to move to the left on this graph. Translating that into a value here, there's a significant increase in the enterprise value and the net asset value in the bottom.
Again, it moves us starting to move into that sort of intermediate, mid-tier sort of sector space. Nicely moving along to the left at over half a billion dollars now, US 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. The benefits of this further diversification with the addition of Mesquite, certainly we hope will translate into that third leg of the stool, the asset diversification, the jurisdictional diversification, and ultimately being a gold producer here. The real potential is for a re-rate. We've been trading in that sort of 0.5 NAV multiple, which is fairly typical of the junior developers. Now we expect certainly to be moving up that curve with two mines into production next year as Aurizona comes into production as well.
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. Basically there's a $100 million credit facility from Scotia. We're really pleased to be welcoming Scotia to the group and as a big supporter of us. They'll be putting in place a more traditional $100 million credit facility with a LIBOR plus 3%-4% interest rate. It's a 4-year term with six monthly payment holiday to start and then quarterly installments thereafter. As well, Sprott continues to support us.
They're the lender on the Aurizona side, and they brought to the table a $20 million credit facility here at a LIBOR plus 6.5% with repayment beginning in December 2020, so further out in the future. We certainly expect to see 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. We've had very strong debt and equity support. The equity financing piece is about $75 million. $50 million of that is on a non-brokered equity financing, which is fully subscribed. Ross Beaty is participating along with other existing shareholders such as Richard Warke and Lukas Lundin, and even some new institutional shareholders will be coming into the fold here.
Ross, Richard, and the other key shareholders will be stepping up for about $25 million or so of that financing. Really excellent support, really appreciate that. The offering price is $0.95, and the brokered equity finance will be on the same basis. It'll be $25 million led by Scotiabank and BMO, it's a bought deal private placement. In terms of the use of funds there on the right-hand side, the purchase price is about $160 million. We'll be supporting a reclamation bond that we'll be transferring across from New Gold. Our expectation is about $12 million-$13 million to support that as well. There'll be some working capital available for the mine of sort of 5 million-$10 million, fees of $5 million, and some other working capital available for other activities such as drilling and that.
That's the total of $195 million of financing being raised. Looking at 13, what does this look on a pro forma basis for the corporate structure? The key items to note here are the basic shares outstanding. Another 100 million shares will be issued here, so it's less than 20% of our current shares outstanding. We'll be adding very significant resource and operator to our base for issuance of less than 20% of our shares. We're really excited about that. We're trying to be very disciplined with our issuance of shares and equity as we move forward here. The market cap overall will move closer to that CAD 600 million mark, just under that at CAD 575 million. In terms of cash and debt on a pro forma basis, closer to $100 million of cash, and the drawn debt will be about $175 million.
Again, I think with this acquisition and with Aurizona coming into production next year and Castle the 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. This provides us with the flexibility and liquidity we need. Also brings us closer to potential index inclusion, and some further liquidity we hope as we move past that half a billion dollar 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, and we've come a long way in the last nine 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 we said we would do early in the new year. We think this is a really good opportunity to buy a good mine at a reasonable price on a NAV basis. 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 has continued on since year-end, and we're really on our way, and this is a major step towards becoming that major gold producer, which is our long-term gold strategy here.
This overnight transformation from a development company to gold producer brings us immediate cash flow generation from the 140 to 50,000 ounces that Mesquite will bring. We've talked about the improved gold profile with the increase in reserves and resources already, but it really is a significant increase 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. It really does start to reduce the risk profile and diversify out the asset base with our third 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. We really are excited to be moving forward here and over the next few months, we'll be working hard to close this transaction, adding it into the fold before the new year, and really working with the team down in Mesquite to look at all those, the ability to work together with our Castle Mountain team as we ramp that up over the next year. That brings to conclusion the formal part of our presentation. I'll flip on to 15 as we move towards the question and answer section here. Thanks for joining this morning.
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. We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. If you are participating online, you can submit a question using the Ask a Question tab on your screen. We will pause for a moment as callers join the queue.
While we're waiting for people to queue up, I'll ask the question that I've already received a few times now. What sort of levels of production are you expecting from Mesquite next year and going forward?
We're talking based on the guidance that we have seen from New Gold, we're looking at about 135,000 ounces. Yeah. 140,000 ounces a year is kind of where we're looking at from based on the guidance that we're seeing from New Gold.
We're certainly looking at more of the same of what we've seen over the last sort of five to 10 years, and that fairly consistent production profile in that sort of range.
Okay, we can take the question from the phone, please.
Thank you. Our first question comes from Rahul 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 for Mesquite in the next few years?
Thanks, Rahul, for the question. I'm actually going to let Peter answer that one.
Hey, Rahul. We do expect to be able to use tax synergies and a U.S. consolidated group for tax reporting purposes, as a result of the acquisition. As to modeling out the total taxes payable over the coming years, we are frankly early in our tax structuring process, we absolutely do intend to utilize the advantageous tax reporting structure that the U.S. allows there.
Perfect, thanks. 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, Rahul. It's a little bit early to say exactly what they are, we are looking at certainly some opportunities in there, absolutely within the current footprint. Yes.
Okay, thanks. That's all that I had.
Great, thanks.
All right, I've got a three-part question from an investor in Bulgaria. He says, "There's about CAD 113 million planned 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 something we'll certainly be looking at closely. 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.
Is there any opportunity to effect 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 two operations, where we have an opportunity to reduce, particularly on the consumable side, the prices that we pay for our consumables because we're basically doubling our purchasing of them.
Okay.
There may be some G&A opportunities as well, where we're dealing with the regulators and our reporting and that structure certainly probably get some benefits of having two operations within 200 miles of each other.
Last question, do you see any opportunity to extend the mine life at Mesquite with exploration or other upside?
Yes, the same as with Rahul's question. Yes, we certainly see an opportunity, and it's something that we're going to be digging into, pardon the pun. Certainly it's something we want to explore and see what's there.
Certainly when we looked at this acquisition, we looked at it on a sort of standalone basis at the moment with what's there, what's in reserve and resource. We didn't factor in the upside or that opportunity. It's something we will look at as we get closer to the operation.
Just to follow up on that, a question from a Canadian investor. What do you anticipate for the current mine life based on what you've got right now?
We're talking about excluding the rinse and trickle-down leaching, we're talking about four years. With the carry-on leaching, we're talking about another two to three years on top of that. In terms of what we might find and how we might expand the reserves, it's really hard to say, but it's that sort of.
There are another million two ounces in resource that certainly we expect to be looking at. If higher gold prices certainly come back into play, there's great opportunity there as well. We're looking at sort of six to eight-year runway at the moment.
Another Canadian investor. Do you expect to take steps now to graduate to the TSX?
Yeah. Well, we certainly, I think we may be one of the largest companies on the TSXV. 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?
As we've said at the beginning of the year, I think Ross Beaty's been very vocal about this in his presentations as well, our goal here is to become a major gold producer. We've now got three legs to that stool, lots of upside within the portfolio. We will continue to look and in 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 three years. I kind of look at it as well on sort of a comparable basis to an Endeavour Mining, which is four or five mines with a nice development project in the pipeline. That's our goal.
We will have to acquire at least one or two more along the way. We're going to stick with the disciplined approach. For the right price and the right timing, we will buy something. We're certainly not going to go out and throw our equity around at the wrong prices. We're going to be very disciplined as we look forward.
All right. Well, there's no more questions on the phone and no more questions online. I guess you can give us your closing remarks.
All right. Well, thanks everyone for joining, particularly those of you on the West Coast at 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. We're really excited to be adding the team from Mesquite into the fold here in the next couple of months. Please watch this space. We'll have lots of news out in the next six months.
This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.