Midtier miner Gran Colombia on Thursday announced a letter of intent to spin-out its interest in the Zancudo project, over which Iamgold has an option, to TSX-V-listed junior ESV Resources.

Gran Colombia will also subscribe for C$3-million of subscription receipts in a non-brokered private placement being completed concurrently by ESV.

“In light of the bullish outlook for silver, we see the acquisition of an investment in ESV as a tremendous opportunity to participate in a new vehicle that is turning its attention to becoming a silver focused company looking to offer its shareholders exposure and leverage to the precious metal. We also see the spin out of our interest in the Zancudo project as an opportunity to create value for our shareholders in this undervalued silver-gold asset,” commented Gran Colombia executive chairperson Serafino Iacono.

He added that Gran Colombia would provide in-country operational expertise to ESV to advance its projects in Colombia, including an exploration programme planned for the Guia Antigua project following completion of the transactions and financing by ESV.

Canada-based Iamgold in 2017 entered into an option agreement for the exploration and potential purchase of interest in the 1 052-ha Zancudo project, in the Titiribi mining district of Antioquia. For a 65% interest, Iamgold had to incurring $10-million of mineral exploration expenditures over a six-year period, subject to meeting specified annual work commitments during this period. From 2017 through 2019, Iamgold has completed 16 224 m of drilling at Zancudo and has incurred more than $4-million of its exploration commitment.

Gran Colombia said that, owing Covid-19, Iamgold had suspended its drilling programme in 2020. Iamgold has a second option to acquire a further 5% undivided interest, for an aggregate 70% undivided interest in Zancudo, by completing a feasibility study within three years after exercising the first option. Upon exercise of the first or the second option, the parties would form a joint venture to hold Zancudo, to advance the exploration and, if feasible, to advance the development and mining of any commercially exploitable ore body.

ESV has agreed to be bound by the terms of the option agreement with Iamgold.

Under the terms of the spin-out transaction, ESV would issue 27-million common shares to Gran Colombia in exchange for its interest in the Zancudo project.