JOHANNESBURG (miningweekly.com) – Toronto-listed Oroco Resources on Monday announced that it would sell its Mexican subsidiary Minas de Oroco Resources, which fully owns the Cerro Prieto project, in Sonora state, Mexico, to Goldgroup Mining for $18-million.

The Cerro Prieto gold/silver project encompasses mineral concessions totalling about 7 000 ha and contains about 17.5 km of strike length of the mineralised structure hosting the current resource.

The transaction entailed an initial payment of $4.5-million on closing and quarterly payments based on a calculation of $150/oz produced from the properties, and was subject to minimum quarterly payments of $625 000 starting one year after closing.

Quarterly payments would be made until either the full purchase price was paid, which represented 90 000 oz of production, or until Goldgroup permanently ceased production at the properties.

Oroco Resources stated that if commercial production did not start at Cerro Prieto prior to January 1, 2014, the first two quarterly payments would be reduced to $250 000, with the yearly minimum to be fulfilled by the fourth quarterly payment and the minimum quarterly payments maintained thereafter.

Further, under the terms of the agreement, and subject to the approval of the TSX Venture Exchange, Goldgroup would subscribe within seven days for a private placement of five-million units in Oroco at a price of C$0.20 apiece. Each unit would comprise one common share and one nontransferable share purchase warrant entitling Goldgroup to purchase one common share of Oroco for $0.25 for a period of two years from the date of closing of the private placement.

However, the closing of the sale was subject to Oroco obtaining binding lock-up agreements from shareholders representing no less than 22% of the outstanding shares of the company, the approval of the shareholders, the approval of the TSX Venture Exchange and the TSX, as well as material adverse change exceptions.

The parties have agreed that Oroco would pay Goldgroup a $500 000 break fee if Oroco did not complete the transaction by June 30.

"This transaction very importantly eliminates Oroco's current debt obligations and provides it with cash sufficient to allow the company to focus on its newly registered Xochipala property in the Guerrero gold belt. The prospect of sustained working capital should minimise near-term share dilution and provide Oroco with the opportunity to more aggressively pursue its highly prospective target at Xochipala," Oroco president and CEO Craig Dalziel indicated.