Pinnacle Silver & Gold Secures Key $5M Non-Equity Funding for El Potrero Gold-Silver Project

Pinnacle Silver & Gold Corp (TSX-V:PINN, OTCQB:PSGCF, FRA:P9J) has announced a significant milestone for its El Potrero gold-silver project located in Durango, Mexico. The company has officially appointed Auramet Capital Partners as the lead project financier, tasked with arranging or potentially providing up to $5 million in crucial non-equity financing for the project’s ongoing development.

This strategic agreement marks a pivotal moment for Pinnacle, underscoring a commitment to advancing the El Potrero project through a less dilutive capital structure. Non-equity financing is a form of funding that does not involve the issuance of new shares, thereby preventing the dilution of existing shareholders’ ownership. This can include various instruments such as debt, royalty streams, or streaming agreements, which are often favored by mining companies to maintain shareholder value during development phases.

The terms of the engagement include a seven-month exclusivity period during which Pinnacle and Auramet will work collaboratively to finalize a mutually acceptable financing package. This process is subject to rigorous due diligence, which is a standard and essential step in any significant financial transaction. It involves a thorough investigation into the financial, operational, and legal aspects of the El Potrero project to assess risks and opportunities. Furthermore, the financing is contingent upon the project’s continued operational and financial progress, along with other customary conditions typical of such large-scale ventures.

A key provision within the agreement grants Auramet the right of last offer to provide the necessary financing, though it is not under an obligation to do so. This structure provides a competitive edge for Auramet while ensuring Pinnacle has a committed partner. Additionally, a $400,000 break fee is stipulated, payable by Pinnacle should it accept an alternative financing offer from another party during the exclusivity period. This mechanism serves to protect Auramet’s investment in time and resources during the negotiation phase.

Robert Archer, President and CEO of Pinnacle Silver & Gold, emphasized the strategic rationale behind this financing approach. He stated that the company’s primary objective is to secure non-dilutive funding to propel El Potrero towards production. This strategy aims to minimize the company’s reliance on often volatile equity markets, which can fluctuate significantly and impact a company’s ability to raise capital efficiently. Partnering with a reputable metal trader and financier like Auramet not only enhances the project’s credibility but also provides invaluable financial flexibility, shielding Pinnacle from the unpredictable nature of capital markets during critical development stages. Archer highlighted his confidence in Auramet, citing a long-standing relationship and their prior investment in Pinnacle’s last financing round as evidence of their strong support for the management team, business model, and the El Potrero Project.

Concurrent with the financing efforts, work at the El Potrero site is progressing steadily. Underground delineation drilling is currently underway, a crucial activity for defining the extent and quality of the ore body. Initial metallurgical testing has yielded highly promising results, indicating average head grades of approximately 7.7 grams per tonne (g/t) gold and 116 g/t silver. Furthermore, potential recoveries are projected to exceed 97% for gold and reach approximately 70% for silver, signifying robust economic viability for extraction. In terms of infrastructure and regulatory compliance, a feasibility study for a 3.3-kilometer powerline extension has been completed, and baseline studies essential for obtaining a water license and other permits are advancing. Community agreements, vital for smooth operations and local stakeholder relations, are also progressing as planned. These developments collectively position the El Potrero project on a solid path toward future production.

FAQ

What is non-equity financing, and why is it beneficial for a mining company?

• Non-equity financing is capital raised without issuing new shares, such as debt, royalties, or streaming agreements. For a mining company like Pinnacle, it’s beneficial because it avoids diluting the ownership stake of existing shareholders, unlike equity financing which involves selling shares. This helps maintain share price stability and investor confidence.

What do the metallurgical test results of 7.7 g/t gold and 116 g/t silver, with recoveries over 97% for gold and ~70% for silver, signify?

• These results indicate the quality (grade) and extractability (recovery) of the gold and silver within the El Potrero project’s ore. A grade of 7.7 g/t gold and 116 g/t silver is considered high, suggesting a rich deposit. High recovery rates (especially over 97% for gold) mean that a large percentage of the valuable metals can be efficiently separated from the ore, which is a strong indicator of economic viability and profitability for the project.

How does partnering with a ‘well-known metal trader and financier’ like Auramet Capital Partners benefit Pinnacle Silver & Gold?

• Such a partnership brings multiple benefits: enhanced credibility in the market, easier access to capital due to the financier’s reputation, and financial flexibility. It reduces reliance on volatile capital markets, allowing the company to fund development stages without constantly issuing new equity. A long-term relationship also implies trust and shared strategic vision.