LONDON (Alliance News) - Patagonia Gold PLC shares rose on Monday after it said it has signed a letter of intent with Trilogy Mining Corp which will lead the company to acquire stakes in gold projects in Uruguay in return for staged investments.
Patagonia shares were up 17% to 1.90 pence per share on Monday morning.
The gold miner can acquire up to 100% of Trilogy's Carreta Quemada and Chamizo gold projects in Uruguay, and is expecting the deal to be finalised before the end of 2015.
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.
"It is intended that the funding provided by Patagonia Gold in Phase I will be used to finance a systematic exploration programme, seeking to discover a potential stand-alone gold resource within 18 months, subject to grant of tenure and land access," said the company.
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.
"In summary, Patagonia Gold believes that the properties are good exploration projects, with proven potential on a very poorly explored greenstone belt, but it is too early to consider either a resource development project," said Patagonia.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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