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Nexa Resources buying out Brazilian zinc project partner in US$70M deal

Nexa Resources SA agreed to fully acquire Karmin Exploration Inc. for about US$69.3 million in cash, or about 77 U.S. cents per diluted share, using cash on hand.

The consideration represents approximately a 28% premium to its closing price on Aug. 26 and a 36% premium to the 20-day volume-weighted average price, and the deal is expected to close in the fourth quarter.

In the absence of a superior proposal, shareholders owning about 72% of Karmin have agreed to back the deal, with the company board also backing the transaction, Karmin said Aug. 26.

Nexa owns a 70% stake in the Aripuana zinc project in Brazil, while Karmin owns the remaining 30%. Karmin said the deal removes risks for the company related to Aripuana's construction and ramp-up.

Nexa will also provide Karmin with a US$700,000 demand loan to cover costs associated with the transaction, with any cash left over to be transferred to a new spinoff company named Kar Gold Inc. The spinoff will be formed after the deal closes and will hold Karmin's 5,753,138 shares of VI Mining PLC, which has an exploration portfolio in Peru, including the Cushuro gold project.

Karmin shareholders will receive shares of Kar Gold based on a pro rata basis through a dividend.

In July 2018, Karmin Exploration agreed to sell its Cushuro gold property to VI Mining for US$27.5 million in shares.