LONDON (Alliance News) - Patagonia Gold PLC Tuesday said it has finally executed the option agreement with Trilogy Mining Corp which could lead to the company wholly-owning two gold projects in Uruguay following a small delay.
Patagonia signed a letter of intent concerning the deal with Trilogy back in November and was originally hoping to formalise the deal before the end of 2015. Patagonia has now executed the option agreement between the two companies that will allow Patagonia to acquire up to 100% of two of Trilogy's gold assets.
The Carreta Quemada and Chamizo gold projects are very early stage exploration projects and Patagonia has conceded it is too early to consider a resource or to label the two assets as development projects. Patagonia hopes to discover a potential stand-alone gold resource within 18 months.
"Patagonia Gold believes that this transaction represents an excellent opportunity to acquire additional gold projects with good geological potential in a new jurisdiction, enabling the company to diversify its geographical and political risk," said Patagonia.
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, and 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.
Patagonia shares were trading flat on Tuesday morning at 2.0 pence per share.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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