Exhibit 10.1


 


 


 


September 7, 2021


 


Via E-mail


 


Aquila Resources Inc. 


141 Adelaide Street West, Suite 520 


Toronto, Ontario 


Canada M5H 3L5


 


Attention: Barry Hildred, Executive Chairman,
and Guy Le Bel, President and Chief Executive Officer


 


Gentlemen,


 


Further to our previous discussions, this letter
agreement (this “Agreement”) sets out our mutual agreement regarding a proposed business combination transaction (the
 “Transaction”) between Gold Resource Corporation (“Gold Resource”) and Aquila Resources Inc. (“Aquila”)
involving the acquisition of all the issued and outstanding shares of Aquila (the “Aquila Shares”) for consideration
consisting of shares of common stock of Gold Resource (“GORO Shares”).


 


Gold Resource is a gold and silver producer, developer
and explorer organized under the laws of the State of Colorado and headquartered in Denver. Our Don David Gold Mine in Oaxaca State,
Mexico consists of six properties located along 55 continuous kilometers of the San José structural corridor, having estimated
proven and probable reserves of approximately 158,000 ounces of contained gold and 9.5 million ounces of contained silver as at December 31,
2020. Gold Resource has a fully-diluted market capitalization of approximately US$136 million based on its current 20-day volume-weighted
average price (“VWAP”) on the NYSE American stock exchange (the “NYSE American”) as of the close
of trading on September 3, 2021.


 


Gold Resource and its technical advisors have
devoted significant time and effort to our due diligence concerning Aquila’s Back Forty Project. Upon the entering into of this
Agreement, we will engage in negotiations with you and your board of directors within the parameters set out in this Agreement to continue
to advance towards completing the Transaction on an expedited basis.


 


		1.	Transaction Value



 


Gold Resource is prepared to acquire (directly
or through a wholly-owned Canadian subsidiary) all of the issued and outstanding Aquila Shares for 0.0399 of a GORO Share per Aquila Share
(the “Share Exchange Ratio”), to be issued upon completion of the Transaction. This represents an offer of C$0.09 per
Aquila Share reflecting a premium of 12.5% and an aggregate acquisition price for 100% of the outstanding Aquila Shares of approximately
C$30.9 million, based upon the closing prices of the Aquila Shares on the Toronto Stock Exchange (the “TSX”) and the
GORO Shares on the NYSE American on September 3, 2021, and the average Bank of Canada exchange rate on such date. Based upon the
20-day VWAPs of the Aquila Shares on the TSX and the GORO Shares on the NYSE American, each as of the close of trading on September 3,
2021, and the daily average Bank of Canada exchange rate during the same 20 trading day period, the Share Exchange Ratio offers value
to Aquila’s shareholders of C$0.087 per Aquila Share, representing a 29% premium over the 20-day VWAP of the Aquila Shares.


 


2000 S. Colorado Boulevard - Suite 10200 -Tower 1 


Denver, CO, 80222 


Tel. No. 720.459.3854


 






    


     


    

 


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The Share Exchange Ratio is based upon our understanding
that there are 343,395,707 Aquila Shares, 19,109,243 options to purchase Aquila Shares, 5,527,030 restricted share units (“RSUs”)
and 3,634,402 deferred share units (“DSUs”) currently issued and outstanding. With respect to the treatment of convertible
securities, upon completion of the Transaction:


 


		a)	each of Aquila’s options which are outstanding on the effective date of the Transaction (the “Effective
Date”), whether vested or unvested, will be cancelled and surrendered without any payment in respect thereof; and



 


		b)	each of Aquila’s RSUs and DSUs which are outstanding on the Effective Date, whether vested or unvested,
will be cancelled and surrendered in exchange for a cash payment from Aquila equal to the 5-day VWAP of the Aquila Shares on the TSX as
of the close of trading on the second trading day preceding the Effective Date (less applicable withholdings).



 


Upon completion of the Transaction, the former
Aquila shareholders will own approximately 14.9% of the issued and outstanding GORO Shares on a fully diluted basis, allowing Aquila shareholders
the opportunity to participate in the value we expect to continue to create from Gold Resource’s expanded portfolio of assets.


 


The Share Exchange Ratio assumes that there are
no other securities of Aquila outstanding, including but not limited to warrants, convertible securities or other rights or options to
acquire securities of Aquila. This Agreement also assumes that, other than the completion of Aquila’s previously announced sale
of its Bend and Reef exploration properties (the “Bend and Reef Sale”), there will be no material changes in the balance
sheet or operations of Aquila between the date hereof and completion of the Transaction. Gold Resource does not currently own any Aquila
Shares.


 


In connection with the Transaction, GORO intends
to honor all of the terms and conditions of Aquila’s existing employment agreements with its employees.


 


		2.	Strategic Rationale



 


We believe a business combination between Gold
Resource and Aquila is compelling from a financial, strategic and operational perspective and would like to highlight the following benefits
of the Transaction to Aquila’s shareholders:


 


		·	Based on the 20-day VWAPs of the Aquila Shares and the GORO Shares, the offer represents an immediate
premium to the shareholders of Aquila of approximately 29%. Given the current market environment and the lack of liquidity in the market
for the shares of Aquila, we believe that this a compelling offer.






		·	It should be pointed out that GORO currently suffers from both a single mine and Mexican market discount
and is trading at approximately 2.5 times free cash flow from operations. This provides the Aquila shareholders participation in the anticipated
re-rating of GORO from a one mine company in Mexico to a two mine company with jurisdictional diversification.



 






    


     


    

 


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		·	Aquila shareholders will have the opportunity to participate in the creation of a multi-jurisdictional,
diversified precious and base metal producer. We believe the combined company will:



 


		o	offer a peer leading growth profile, robust free cash flow generation and a strong balance sheet to fund
disciplined, high-return growth from cash flow and cash on hand with no significant dilution;






		o	provide the ability to negotiate from a position of financial strength with lenders to fund the project
capex;






		o	benefit from our strong technical and operational teams’ expertise in polymetallic, open pit and
underground mines;






		o	benefit from value creation driven by a complementary portfolio of assets, geographical diversification,
historical low-cost production and organic growth potential and the benefits of scale that accrue to multi-mine producers;






		o	offer substantial measured and indicated (M&I) resources with a consistent grade profile;






		o	offer a high level of confidence that the Back Forty Project will be placed into production on an expedited
basis thus elevating GORO into a mid-tier producer with the anticipated attendant re-rating; and






		o	have an enhanced capital markets profile in the United States and Canada, offering greater scale and trading
liquidity to heighten appeal to global index, resource and generalist investors.



 


		3.	Structure



 


The Transaction will be structured as a plan of
arrangement of Aquila pursuant to the laws of the Province of Ontario, requiring Aquila shareholder approval and court approval. The approval
of Gold Resource shareholders will not be required in connection with the Transaction as set out herein.


 


Gold Resource will work with representatives of
Aquila to determine a specific structure and sequencing of the plan of arrangement steps to give effect to the Transaction in a manner
most beneficial to our respective securityholders. The Transaction will not be structured to afford a tax rollover to Canadian taxable
shareholders of Aquila upon the exchange of their Aquila Shares for GORO Shares.


 


		4.	Due Diligence



 


Gold Resource has conducted substantial technical
due diligence on the Back Forty Project. The parties agree to continue to facilitate reciprocal technical, operational, financial, legal
and business due diligence. Gold Resource’s remaining due diligence review (which will largely address operational, financial, legal
and business matters) will be completed during the Exclusivity Period (as hereinafter defined), concurrently with the preparation and
negotiation of definitive transaction agreements and any reciprocal due diligence that Aquila intends to conduct with regard to Gold Resource.


 


		5.	Conditions & Definitive Agreements



 


The parties hereto agree to negotiate in good
faith, acting reasonably, with a view to entering into a mutually acceptable definitive arrangement agreement (the “Arrangement
Agreement”) providing for the detailed terms and conditions upon which the Transaction will be implemented. The entering into
by the parties of the Arrangement Agreement is subject to the satisfaction of the following conditions:


 


		(a)	each of Gold Resource and Aquila being satisfied with its respective due diligence investigations regarding
the other party as set out in Section 4 above;



 


		(b)	the board of directors of Aquila having received a written opinion from its financial advisors that, as
of the date of this Agreement, the consideration to be received by the Aquila shareholders pursuant to the Transaction is fair, from a
financial point of view, to the Aquila shareholders;



 






    


     


    

 


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		(c)	the board of directors of each of Gold Resource and Aquila having unanimously approved the terms and conditions
of the Arrangement Agreement;



 


		(d)	the entering into of definitive voting support agreements between Gold Resource and (i) each of the
directors and officers of Aquila, and (ii) Orion Mine Finance, each in a form acceptable to Gold Resource, contemporaneously with
the entering into of the Arrangement Agreement (collectively, the “Voting Support Agreements”); and



 


		(e)	the negotiation of arrangements acceptable to Gold Resource for the satisfaction of any “change
of control” or similar obligations of Aquila that would be triggered by the entering into of the Arrangement Agreement or the completion
of the Transaction under any of Aquila’s material contracts.



 


The Arrangement Agreement will reflect the Share
Exchange Ratio and the treatment of the Aquila options, RSUs and DSUs set out herein, and will contain customary representations, warranties
and covenants, closing conditions (including the obtaining of all necessary regulatory approvals, the approval of Aquila’s shareholders,
and court approval), and deal protection mechanisms for a transaction of this nature, including non-solicitation covenants binding on
Aquila, a right of Gold Resource to match any superior proposal made in respect of Aquila by any third party, and payment by Aquila to
Gold Resource of a break fee equal to 4.0% of the total Transaction value in the event of the termination of the Arrangement Agreement
under certain circumstances.


 


		6.	Exclusivity



 


In consideration of the entering into by Gold
Resource of this Agreement, Aquila agrees that during the period from and after the date hereof until the earliest of (i) the execution
and delivery of the Arrangement Agreement and the Voting Support Agreements, (ii) the mutual agreement of the parties to terminate
discussions regarding the Transaction, and (iii) 5:00 p.m. (Toronto time) on October 22, 2021, being the date that is 45
days from the date hereof (as the period ending on such earliest date may be extended by the mutual written agreement of the parties,
the “Exclusivity Period”), Aquila shall, and shall cause its Representatives to:


 


		(a)	negotiate exclusively and in good faith with Gold Resource in respect of the Transaction with a view to
settling an Arrangement Agreement as soon as practicable;



 


		(b)	not complete, or enter into any agreement, letter of intent or similar arrangement with any person other
than Gold Resource and its Representatives concerning, any:



 


		(i)	plan of arrangement, amalgamation, share exchange, merger, business combination, consolidation, reorganization,
debt financing, restructuring, recapitalization or similar transaction involving Aquila or any of its subsidiaries;



 


		(ii)	sale or disposition of any material assets of Aquila or any of its subsidiaries outside the ordinary course
of business other than the Bend and Reef Sale;



 


		(iii)	issuance of any securities of Aquila from treasury (or grant of any other options or other rights to acquire
securities of Aquila) other than the issuance of (A) Aquila Shares pursuant to options, RSUs or DSUs awarded prior to the date hereof,
(B) certain RSUs to be issued to a senior executive of Aquila pursuant to such individual’s employment agreement with Aquila,
and (C) DSUs to be issued to members of the board of directors of Aquila on account of directors’ fees accruing until the Effective
Date, consistent with Aquila’s past practice for compensating its directors; or



 






    


     


    

 


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		(iv)	take-over bid, issuer bid or exchange offer for any securities of Aquila that, if consummated, would result
in a person or group of persons beneficially owning 20% or more of any class of voting or equity securities of Aquila or any of its subsidiaries



 


(each of the foregoing (i) through (iv), an “Alternative
Transaction”);


 


		(c)	not make, initiate, solicit, facilitate or knowingly encourage, or enter into or otherwise participate
or engage in any discussions or negotiations regarding, an Alternative Transaction or any inquiry, proposal, offer or public announcement
of an intention in respect of an Alternative Transaction (any of the foregoing being referred to herein as an “Alternative Proposal”),
provide any information to any third party with respect to any Alternative Proposal, or otherwise co-operate in any way with or knowingly
assist, participate in, facilitate or encourage any attempt by any other person to do or seek to do any of the foregoing (in each case
other than Gold Resource or its Representatives);



 


		(d)	immediately cease and terminate any solicitation, facilitation, knowing encouragement, discussions, negotiations
or other activities (including the provision of access to non-public information regarding Aquila, whether in a data room or otherwise)
commenced prior to the date hereof with any person (other than Gold Resource and its Representatives) with respect to any Alternative
Transaction or Alternative Proposal; or



 


		(e)	approve or recommend any Alternative Proposal or any Alternative Transaction.



 


For purposes of this Agreement, a party’s
 “Representatives” shall consist of such party’s subsidiaries and its and their respective directors, officers,
employees, advisors, representatives and agents.


 


During the Exclusivity Period, Aquila shall notify
Gold Resource promptly (and in any event within 24 hours) upon receipt by it or by any of Aquila’s Representatives, whether oral
or written, of (i) an Alternative Proposal, including its material terms, (ii) any request for non-public information relating
to Aquila, and (iii) any inquiry or request for discussion or negotiations regarding any Alternative Transaction. Such notice shall
include the identity of the person or group of persons making such Alternative Proposal, inquiry or request and copies of all agreements
and documents received in respect thereof, from or on behalf of any such person or group of persons.


 


Gold Resource and Aquila may extend the Exclusivity
Period by mutual agreement, with neither party unreasonably withholding approval of an extension if both Gold Resource and Aquila are
working diligently and in good faith towards the successful completion of the Transaction.


 


Aquila agrees that irreparable harm would occur
in the event that any of the provisions of this Section 6 were not performed in accordance with their specific terms or were otherwise
breached, for which money damages would not be an adequate remedy at law. It is accordingly agreed that Gold Resource will be entitled
to an injunction and/or other equitable relief to prevent breaches of this Section 6, any requirement for the securing or posting
of any bond in connection with the obtaining of any such injunctive or other equitable relief hereby being waived, this being in addition
to any other remedy to which Gold Resource may be entitled at law or in equity.


 






    


     


    

 


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		7.	Transaction Expenses



 


Subject to this Section 7, each of Gold Resource
and Aquila will be responsible for and will bear all of its respective costs and expenses incurred in connection with its due diligence
investigations and the negotiation and implementation of the Transaction. Notwithstanding the foregoing, in the event that all of the
following occur:


 


		(a)	at any time during the Exclusivity Period, an Alternative Proposal, whether oral or written, is received
by Aquila or any of Aquila’s Representatives in writing or is publicly announced or otherwise publicly disclosed by any person;



 


		(b)	immediately prior to the end of the Exclusivity Period (or any extension thereof), the parties have not
entered into an Arrangement Agreement, and Aquila does not agree to extend the Exclusivity Period following a written request by Gold
Resource for such an extension, with the result that this Agreement is terminated; and



 


		(c)	prior to the date which is 180 days following such termination of this Agreement, Aquila or any of its
subsidiaries enters into a binding agreement (other than a confidentiality agreement) with respect to an Alternative Transaction,



 


then within two (2) business days following
the receipt by Aquila from Gold Resource of supporting documentation in the form of the relevant invoices and receipts, Aquila shall pay
to Gold Resource, by wire transfer of immediately available funds to an account specified by Gold Resource, the amount of all out-of-pocket
costs and expenses (including the fees and expenses of legal counsel and financial, technical, accounting and tax advisors) incurred by
Gold Resource during the Exclusivity Period in connection with this Agreement or the proposed Transaction, to a maximum of US$500,000
(the “GORO Expense Reimbursement Amount”). Aquila shall provide prompt written notice to Gold Resource of any event
referred to in Section 7(a) or 7(c) above which is not publicly announced.


 


In addition, in the event that the circumstances
in the immediately preceding paragraph of this Section 7 do not apply, and immediately prior to the end of the Exclusivity Period
(or any extension thereof), the parties have not entered into an Arrangement Agreement, and either of Gold Resource or Aquila (the “Refusing
Party”) does not agree to extend the Exclusivity Period following a written request by the other party (the “Requesting
Party”) for such an extension, with the result that this Agreement is terminated, then within two (2) business days following
the receipt by the Refusing Party from the Requesting Party of supporting documentation in the form of the relevant invoices and receipts,
the Refusing Party shall pay to the Requesting Party, by wire transfer of immediately available funds to an account specified by the Requesting
Party, the amount of all out-of-pocket costs and expenses (including the fees and expenses of legal counsel and financial, technical,
accounting and tax advisors) incurred by the Requesting Party during the Exclusivity Period in connection with this Agreement or the proposed
Transaction, to a maximum of C$250,000 (the “Reciprocal Expense Reimbursement Amount”).


 


Each of the parties agrees that each of the GORO
Expense Reimbursement Amount and the Reciprocal Expense Reimbursement Amount represents a genuine pre-estimate of the damages that Gold
Resource or Aquila, as the case may be, will suffer as a result of the circumstances giving rise to the obligation of the other party
to make such payment, and is not a penalty. Each of Aquila and Gold Resource irrevocably waives any right it may have to raise as a defense
that the applicable amount payable by it is excessive or punitive.


 






    


     


    

 


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		8.	Public Announcements and Confidentiality



 


Promptly upon the execution of this Agreement
by the parties, the parties will issue a joint press release announcing the entering into of this Agreement. The parties agree and acknowledge
that (i) all discussions and negotiations between them pursuant to this Agreement are subject to the terms and conditions of the
mutual confidentiality agreement between the parties dated July 6, 2021 (the “Confidentiality Agreement”), and
(ii) in the event that either party determines that public disclosure with respect to the Transaction is required by reason of applicable
securities laws or stock exchange requirements, it will promptly provide the other party with prior notice thereof and consult with the
other party regarding the form of any such disclosure.


 


		9.	Nature of Agreement & Termination



 


This Agreement shall be binding on and enforceable
by the parties and their respective successors and shall not be assignable by either party without the prior written consent of the other
party.


 


This Agreement shall terminate upon the conclusion
of the Exclusivity Period. Upon such termination, the provisions of this Agreement shall be of no further force or effect and neither
party shall have any liability to the other party hereunder, except in relation to breaches of any of the provisions of this Agreement
that occurred prior to such termination, except that the provisions of Sections 7 and 8 shall survive the termination of this Agreement.


 


		10.	Other Matters



 


This Agreement will be governed and construed
in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein. Each of the parties hereby irrevocably
attorns to the non-exclusive jurisdiction of the courts of the Province of Ontario in respect of all matters arising under and in relation
to this Agreement and waives, to the fullest extent possible, the defense of an inconvenient forum or any similar defense to the maintenance
of proceedings in such courts.


 


No amendment to this Agreement will be valid or
binding unless set forth in writing and duly executed by each of the parties hereto. No waiver of any breach of any provision of this
Agreement will be effective or binding unless made in writing and signed by the party purporting to give the same and, unless otherwise
provided, will be limited to the specific breach waived.


 


If any provision of this Agreement is determined
to be invalid, illegal or unenforceable in any respect, all other provisions of this Agreement will nevertheless remain in full force
and effect and the parties will negotiate in good faith to replace any provision that is invalid, illegal or unenforceable with such other
valid, legal and enforceable provision as most closely replicates the economic effect and rights and benefits of such impugned provision.


 


This Agreement may be executed and delivered in
any number of counterparts (including by facsimile or electronic transmission), each of which will be deemed to be an original and all
of which taken together will be deemed to constitute one and the same instrument.


 






    


     


    

 


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* * * * * * * *


 


Gold Resource has invested significant time and
resources in considering this Transaction to date, and is committed to working expeditiously towards executing definitive agreements and
implementing the Transaction. Gold Resource has engaged the services of Beacon Securities Limited as financial advisor, Fasken Martineau
DuMoulin LLP as Canadian legal counsel and Davis Graham & Stubbs LLP as U.S. legal counsel to complement our experienced management
team. We understand that you have engaged the services of Scotia Capital Inc. as financial advisor and Goodmans LLP as Canadian legal
counsel. We and our advisors look forward to working with you and your advisors in implementing this Transaction to the benefit of both
parties and their shareholders.


 


[Signature page follows.]


 






    


     


    

 


	Yours very truly,	 
	 	 
	GOLD RESOURCE CORPORATION	 



 


	By: 	/s/ Allen Palmiere	 
	 	 	 
	Name:	Allen Palmiere	 
	 	 
	Title:	CEO, President and Director	 



 


	Accepted and agreed this 7th day of September, 2021.	 
	 	 
	AQUILA RESOURCES INC.	 



 


	By:	/s/ Guy Le Bel	 
	 	 	 
	Name:	Guy Le Bel	 
	 	 	 
	Title:	President & CEO, Director	 



 


[Signature Page to Letter Agreement]