LONDON (Alliance News) - Patagonia Gold PLC Wednesday said the negotiations with Trilogy Mining Corp that could lead to Patagonia fully acquiring the Carreta Quemada and Chamizo gold projects in Uruguay are "well advanced" and said it expects to enter a formal agreement before the end of the month.
Patagonia originally announced the deal back in November when it signed a letter of intent with Trilogy to acquire stakes in the two gold projects through staged investments. Potentially, the deal could lead to Patagonia fully acquiring both gold projects.
The deal is slightly behind schedule, with Patagonia originally hoping to finalise the deal before the end of 2015, but the company conceded Wednesday that it is likely the pair will enter a formal earn-in agreement before the end of January.
Patagonia shares were trading up 5.7% to 1.85 pence per share on Wednesday morning.
Under the terms, Patagonia will earn its first 15% stake in the projects by funding USD500,000 of work over an 18 month period, and this will rise to 51% if it funds USD1.5 million of work in the same period.
If it does invest USD1.5 million to earn that 51% stake, it will have an option to increase its stake to 80% by investing a further USD2.0 million into the projects over a two year period. By the end of that second phase to up its stake to 80%, Patagonia plans to have published a JORC compliant mineral resource for the projects.
If the measured and indicated resource at the projects exceeds 400,000 ounces of gold equivalent, Trilogy shall have a put right that requires Patagonia to acquire the remaining 20% stake in the projects, at a price of USD10 per ounce.
Based on 400,000 ounces of gold, this would total USD4.0 million. The payment will however, be limited to 1.5 million ounces, which means Patagonia will spend a maximum of USD15.0 million to acquire that last remaining 20% stake.
That last payment based on the resource can be satisfied by cash or in Patagonia shares.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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