TORONTO (miningweekly.com) – Silver miner Pan American Silver (PAS) has agreed to earn a 75% interest in Mexico-focused silver project developer Kootenay Silver’s Promontorio Mineral Belt silver properties – including the Promontorio and La Negra deposits – and to make a C$2-million subscription investment in Kootenay.

Under terms of the earn-in agreement, PAS would be required to make scheduled payments totalling $8.05-million over a four-year earn-in period and undertake up to $8-million in exploration and development expenditures during this period.

PAS, the operator of seven silver mines in Mexico, Argentina, Peru and Bolivia, would also invest C$2-million in Kootenay by subscribing for 9.09-million shares at C$0.22 apiece.

Upon closing the investment, the parties also expected to enter into a property purchase option agreement under which PAS subsidiary Compania Minera Dolores would provide Kootenay subsidiary Minera JM with the option to acquire up to two of its exploration properties in Mexico in return for a 2.5% net smelter return royalty on each of the acquired properties.

“The PAS transactions serve as catalyst and a strong complement to our new consolidation plan with Northair Silver, providing the amalgamation with greater financial strength and flexibility to focus on the advancement of the La Cigarra silver asset and to pursue further potential consolidation and growth opportunities in the sector,” stated Kootenay president and CEO James McDonald.

PAS president and CEO Michael Steinmann noted that the two projects represented the company with an ideal entry point into the highly prospective mineral belt, located in a preferred jurisdiction, which would allow for the company to add value by using its proven expertise in exploration and project development.

“La Negra is an exciting, high-grade, potentially openpittable deposit, and Promontorio is a large, lower-grade silver resource, which will likely require higher metal prices or better grades to move forward. Kootenay has already defined mineral resources at Promontorio and both deposits retain excellent exploration potential,” said Steinmann.

Kootenay and Northair Silver last week signed a definitive arrangement agreement that would position Kootenay as a dominant landholder in the country.

A 2013 updated measured and indicated resource estimate for the Promontorio project had calculated the deposit to hold about 92.04-million silver-equivalent ounces, and another 24.33-million silver-equivalent ounces classified in the inferred category. The deposit held about 506 000 oz of gold in the measured and indicated resource categories and a further 132 000 oz inferred.