Discovery Silver to acquire Glencore's Kidd operations

Executive Summary

• Discovery Silver Corp. has entered into a definitive agreement to acquire Glencore Canada Corp.'s 100% interest in the Kidd operations in Timmins, Ontario, including the Kidd Creek mine, the Kidd metallurgical site (Kidd Met), and the Kidd tailings management area (TMA).
• The acquisition supports Discovery's strategy to more than double gold production in Timmins to over 500,000 ounces per year by leveraging the Kidd Met site's processing capacity and infrastructure.
• The transaction is valued with an initial $10 million in common shares, offtake arrangements, and a 1% NSR royalty, plus a deferred payment of up to $75 million contingent on regulatory approvals for tailings deposition.

Key Details

• Assets Acquired:
  • Kidd Creek copper, zinc, and silver mine (world's deepest base metal mine, currently at 9,800-foot level).
  • Kidd Met site: Integrated processing facility with 1,200-hectare tailings facility, four independent processing circuits (A, B, C, D), crushing plant, concentrator, five thickeners, and gas-fired concentrate dryers.
  • Kidd Tailings Management Area (TMA).
  • All associated property, claims, assets, and shares of Kidd Creek Timber Ltd.
• Historical Production:
  • Over 60 years of operation (since 1966).
  • Total historical production: 772 million pounds of copper, 2.1 billion pounds of zinc, and 400 million ounces of silver.
  • 2024 production: 40 million pounds of copper, 82 million pounds of zinc, and 1.5 million ounces of silver.
• Consideration and Payment Terms:
  • Upfront: $10 million paid via issuance of Discovery common shares.
  • Offtake: Arrangements related to concentrates produced from the Kidd operations.
  • Royalty: 1.0% Net Smelter Return (NSR) royalty on minerals produced from a large exploration land package held by Kidd Creek Timber Ltd. (outside existing operations).
  • Deferred Payment: Up to $75 million, payable in Discovery common shares or cash at Discovery's discretion.
  • Condition for Deferred Payment: Payable upon receipt of all material permits and regulatory approvals required to deposit gold tailings at the Kidd TMA.
  • Assumptions: Assumption of all financial assurances and environmental/rehabilitation obligations associated with the Kidd Met site and Kidd Creek mine.
• Strategic Synergies and Operations:
  • Production Goal: Double gold production in Timmins to >500,000 oz/year.
  • Processing Capacity: Kidd Met currently operates two circuits (B and C) at ~6,000 tonnes/day. Circuits A and D are idled. Discovery plans to add at least one new gold circuit to process ore from Pamour, Borden, Hoyle Pond, and the TVZ zone.
  • Logistics: Hoyle Pond is ~1 km and Pamour is ~3 km from Kidd Met, significantly reducing haulage costs.
  • Reclamation: Opportunity to reduce reclamation costs at Porcupine and Kidd by using Porcupine waste rock and gold tailings for Kidd TMA.
  • Exploration: Plans to deploy drills at Kidd Creek and surrounding properties to identify new resources for future mining.
• Timeline and Conditions:
  • Anticipated Closing: First half of 2026.
  • Conditions Precedent: Transfer of assets from Glencore, consent of Ontario's Ministry of Mines, Toronto Stock Exchange (TSX) approval, and approval/expiry of waiting period under the Competition Act (Canada).
  • Post-Closing: Glencore has post-closing obligations regarding financial assurances and indemnities.

Notable Quotes

• Tony Makuch, President and CEO, Discovery Silver Corp.: "Acquiring the Kidd operations provides an opportunity to substantially increase our processing and tailings capacity and supports a growth trajectory that could more than double gold production in Timmins to over half a million ounces per year."
• Stephen Lecce, Minister of Energy and Mines, Ontario: "This acquisition reaffirms Ontario as a reliable partner building confidence to invest and expand mines in the province... This is a massive achievement as the Kidd Met site would have been closed this year and now, with renewed confidence, we are taking this fully permitted mill and community to the next level."