TORONTO (miningweekly.com) – The shares of TSX-V-listed Rye Patch Gold slid 34.48% on Tuesday after it announced it had settled a dispute with the largest US-based primary silver producer, Coeur Mining, over claims covering portions of the Rochester and Packard mine areas, in Nevada.

Under the terms of the settlement, which ended the legal dispute among the companies lodged in the Nevada Sixth District Court in 2011, Rye Patch would transfer the disputed claims to Coeur in exchange for $10-million, a 3.4% net smelter royalty (NSR) from revenue generated at the Rochester mine and an option to receive the Blue Bird claim next to Lincoln Hill, west of Rochester.

The NSR would be payable from Rochester production and sales starting on January 1, 2014, and was expected to be completed in about four years, once Coeur had produced 39.4-million ounces of silver at the Rochester mine.

The settlement transactions were expected to close by June 28, and were not subject to any significant external closing conditions. Rye Patch had until ten days after closing to exercise the option to acquire Blue Bird.

“While we believe our legal position is strong, it is, ultimately, in the company's best interests not to continue with a potentially lengthy and protracted lawsuit at the expense of our core business operations.

“This settlement allows Rye Patch to move forward and focus on its core business of finding and developing gold and silver resources in Nevada, while providing nondilutive cash and a royalty stream to the company to identify the next value-adding opportunity,” Rye Patch president and CEO William Howald said.

Coeur president and CEO Mitchell Krebs said that, despite Coeur remaining confident in its legal position, the company believed its stockholders were best served by achieving a commercial solution to this ongoing litigation.

The two companies had been scheduled to meet in court in September.

The battle began in August 2011, when Rye Patch said Coeur failed to pay its yearly fee to retain mining claims around the producer’s Rochester mine.

Rye Patch then staked the claims it said the bigger company had forfeited, some of which accounted for one-fifth of Rochester’s mineral reserves, Coeur said.

The biggest primary silver producer in the US then took Rye Patch to court in December of that year.

Rye Patch in March last year filed a restraining order in Nevada to prevent Coeur from exploring on the claims around Rochester it asserted it now owned.

Rye Patch controlled more than 75 km² along the Oreana trend in west-central Nevada and 66 km² along the Cortez trend near Barrick’s gold discovery.

Rochester produced 2.8-million ounces of silver and 38 066 oz of gold in 2012, at average cash operating costs of $9.62/oz of silver.

At December 31, 2012, Rochester’s proven and probable reserves totalled 79.9-million tons containing about 44.9-million ounces of silver and 308 000 oz of gold. Rochester also reported year-end measured and indicated resources of 264.3-million tons containing about 120.7-million ounces of silver and 865 000 oz of gold. Inferred resources totalled an additional 45.6-million tons containing 27.2-million ounces of silver and 123 000 oz of gold.

Rye Patch’s TSX-V-listed shares lost C$0.10 a share to close at C$0.19 apiece on Tuesday, while those of Coeur dipped 0.31% to close at C$12.78 apiece.