Golden Gift

Aris Mining gains 51% control of rich Soto Norte at 70% off ($24/oz). Plus, Abu Dhabi sovereign fund takes 9.9% Aris stake

Aris Mining CEO Neil Woodyer announced a pleasant surprise this morning.

He’s negotiated for Aris (TSX:ARIS, NYSE:ARMN) (C$ 865M market cap) to increase its stake in one of the giant South American gold deposits at 70% off the expected price.

The seller is Mubadala, an Abu Dhabi sovereign wealth fund.

Aris is acquiring an additional 31% of Colombia’s Soto Norte deposit for C $89 million in Aris Mining shares (9.9% of Aris), plus 6M shares (C$ 34M current market value) on receipt of an environmental license. Aris was expected to pay over 3X more - US $300 million, according to a 2022 option deal.

Aris now owns 51% of Soto Norte. Mubadala holds the remaining 49%.

Explaining the better terms, CEO Neil Woodyer said, "We've got very close to Mubadala, they've got a high-degree of confidence in us, we really wrapped [our] arms around the project, and they could see the best way forward was with us, and we have a limited financial capacity, so this is the best way forward."

The purchase price is roughly $24 per attributable gold ounce, and removes overhang from the existing $300M option, said Aris SVP Capital Markets Oliver Dachsel on the conference call.

Soto Norte contains 8.5 million ounces of gold Indicated at 5.5 grams per ton and 3.6Moz Inferred. That makes it a rare deposit of size and grade.

A 2022 Feasibility Study projected 450,000 ounces of annual production over 14 years at costs of $471 per ounce.

Aris is evaluating a smaller initial project to reduce environmental impact and extend mine-life. They intend to publish a new Pre-Feasibility Study in early 2025. The critical environmental assessment process is anticipated to take another 18 months, with construction potentially starting in 2027.

In 2011, Eike Batista’s AUX acquired Soto Norte for $1.5 billion from Ventana Gold. Mubadala acquired Soto Norte in a 2015 debt settlement with AUX.

Mubadala partnered with Aris on Soto Norte in 2022 for their expertise in country. That deal saw Aris acquire 20% for US $100 million and an option to buy 30% more for $300M. The enhanced deal terms announced today (30% to 31% and ~1/4 price) are significant for Aris.

Aris country manager Alejandro Jimenez said surveys showed disapproval drop from 60% to 10% since Aris joined the project, with 24% advocacy among 1300 of 4000 local residents surveyed. Jimenez expects to gain further support from reducing the mine’s scope.

Importantly, CEO Woodyer suggested permitting of the smaller mine will likely fall at the regional level, rather than federally. Aris is the most recent company to receive a large-scale mining permit in Colombia, with the Marmato Lower Mine now in construction.

"Once [Soto Norte] is operating and socially acceptable, that may be a time to look at expansion," said Woodyer on this morning’s call.

Aris Mining’s flagship Segovia mine is helping fund construction of the new Marmato lower mine and Segovia’s expansion. The company is targeting 500,000 ounces of annual production beginning in the second half of 2026, more than double current production levels.

Enthusiasm was obvious in the tone of management and analysts on the call earlier.

"On the other hand, Abu Dhabi just picked up 10% of Marmato, Segovia, & Toropuro for 30% of an un permitted mine; time will tell who got the better deal. Hopefully, the market will view as a win-win," said investor Garic Moran on X.com.

The market is so far up about 1% on the news, but +60% from our Nov 2023 profile. Soto Norte could help catapult Aris into the big leagues.

As a concentrated shareholder my coverage of Aris should be considered very biased. Please see their SEDAR+ filings for important risk disclosures, including country risk, execution risk, financing, commodity price, etc etc. This may contain errors (hopefully not). I reserve the right to buy or sell any security without notice.