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Samco Gold confident in setting itself apart from peers in next 12 months

Corina, Argentina

Corina, Argentina

Photo by Samco Gold

10th November 2014

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – With prospective projects located on the Deseado Massif of Santa Cruz, Argentina, a potential joint venture (JV) partner with which to move forward on its flagship asset, and with an innovative financing agreement in place, Canadian project developer Samco Gold is on the cusp of differentiating itself from its peers.

Speaking to Mining Weekly Online, Samco executive chairperson and CEO Charles Koppel said he believed the company was favourably positioned to differentiate itself from its junior peers in 2015, despite the low precious-metals price environment, and adverse financing milieu.

The company was currently eagerly awaiting the decision of an Argentinean Court-appointed expert to determine according to a court-prescribed formula, the amount of damages to be awarded in a case involving one of Samco’s directors, with whom it had inked a participation-and-option agreement.

Koppel noted that at the end of last month, the Supreme Court of Justice of Argentina had unanimously denied an extraordinary motion seeking leave to appeal an Argentinean Court of Appeals judgment against Northern Orion Resources (GNOR), now named 0805346 BC and owned by Yamana Gold, which meant that all possible recourses to appeal had been exhausted.

In May 2013, the Argentinean Commercial Court of Appeals ruled in favour of Samco director Dr Ricardo Auriemma on the breach-of-agreement case against GNOR, which was acquired by Yamana in 2007. GNOR was found to have breached a regional alliance agreement with Auriemma relating to dividend payments.

In January, Samco signed an agreement with Auriemma to support the development of its El Dorado-Monserrat (EDM) gold/silver project and the Corina zinc/lead/silver project. Under the participation deal, Samco had the right to participate, on a sliding-scale basis, in any benefits arising from future enforcement of the judgment.

Koppel explained that Samco would use the funds to support further development of its gold and silver assets in Argentina, including the core EDM and Corina properties, without any equity dilution to shareholders.

“It is really now a matter of time while we wait for that decision. There is no established timeline for the award decision, but the expert has had the required information to make the determination for quite a while now, so a decision should be forthcoming soon,” he said.

JV FOCUS

Samco had in June struck an option agreement in the form of a binding letter of intent allowing potential JV partner Pan American Silver (PAS) to earn up to 60% interest in its flagship EDM, freeing Samco to focus on exploring its 100%-owned Corina base metals/silver discovery.

However, definitive documentation was scheduled to be executed by October 1 and the prospective partners had on two occasions extended the deadline for signing the definite documentation by a month, with the current deadline being December 1.

Koppel ascribed the delay in executing the final documentation to a slower-than-expected negotiation process, saying that it was not about merely concluding an option agreement, but talks between the two partners focused on hammering out the finer details of an operating agreement governing how the business would be run in future.

“The parties continue to diligently work to finalise a definitive agreement between their respective subsidiaries and expect to conclude the definitive agreement in the next few weeks,” he noted.

Samco’s EDM project comprises the El Dorado and Monserrat properties, which together cover about 3 000 ha and on which the company has identified six significant target areas for further exploration. EDM is located next to the western boundary of the licence area of the Cerro Vanguardia gold/silver mine, operated by AngloGold Ashanti.

The EDM project hosts more than 15 km of outcropping veins, which have been the subject of exploration campaigns over the past 20 years, including some 20 000 m of drilling and more than 60 km of trenching.

Under the option agreement, PAS would have the exclusive option to acquire a 60% interest in the EDM project, while both parties plan to participate in the exploration and development of the project up to first production. PAS would need to conduct further work, including drilling at EDM equivalent to at least $2-million, followed by preparing a technical report in the form of a prefeasibility study. When exercising its option, PAS would need to make a one-time payment of $5-million to Samco.

Koppel explained that funding for the development of the project might be provided by PAS up to certain limits and under certain lending criteria, which could have the effect of reducing Samco’s carried interest in the project to 30%.

The intention is to form a jointly owned company through which to start mining at EDM. PAS would be the operator.

Koppel pointed out that Samco was also eager to get stuck into the development of the Corina asset, which held the promise of diversifying Samco’s portfolio to base metals such as zinc, which had been bucking the low-metals-pricing trend and was believed to have strong fundamentals in the medium term.

“We are fortunate to have diversity in our portfolio. We have the only discovery of this type in the region. We are very positive and would like to get on with working on that,” he said.

Koppel also noted that Samco was looking at potential company-accretive acquisitions in Argentina and the surrounding region.

“A lot of companies are shying away from deals – I think the larger companies are still suffering from a ‘hangover’ from paying inflated prices in the boom years and, with declining margins and commodity prices, they are now still recovering from that. Having no historic acquisitions, we are a relatively smaller company and new to market, which gives us the potential to shop around,” he highlighted, adding that Samco would, at this point, not want to raise money in any way other than the forthcoming litigation proceeds.

“There is no need to undertake dilutive financing at this stage,” Koppel stated.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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