VANCOUVER (miningweekly.com) – Canadian gold explorer TomaGold is expanding into Chile, after announcing Monday that it had signed a letter of intent (LoI) to acquire all the outstanding shares of Red Metal Resources.

The proposed acquisition will give TomaGold ownership of, or options to own, 100% of the Farellon, Perth and Mateo projects, located in the prolific Candelaria iron-oxide copper/gold (IOCG) belt of Chile's coastal Cordillera, where Freeport McMoRan's Candelaria and Anglo American's Mantoverde mines are located.

Under the terms of the LoI, TomaGold offered to buy all 34.29-million outstanding issued shares for C$3.25-million, including the cash payment of C$500 000 for Red Metal’s outstanding debt. TomaGold will pay for the remainder of the transaction by issuing Class A shares at a price ranging between C$0.15 and C$0.20, depending on the average market price over the 20 days before executing the definitive agreement.

The LoI includes customary provisions, including non-solicitation of alternative transactions, the right to match superior proposals and TomaGold closing a financing of C$700 000 before the closing of the transaction. The parties have agreed to a break-up fee of C$175 000 under certain conditions.

"This is a great transaction for TomaGold, as we are adding high-quality assets with strong exploration potential to our portfolio of properties. We are also diversifying our asset base into copper-gold properties in the world's leading copper-producing country. Moreover, this transaction will enable us to become a producer and generate cash flow on a short-term horizon," stated TomaGold president and CEO David Grondin.

TomaGold aims to develop high-grade gold properties with major mining companies, having formed a joint venture agreement with Iamgold for the Monster Lake project and another with Goldcorp, for the Sidace Lake property, in Ontario.

TomaGold has interests in seven gold properties in northern Quebec, and one in Ontario, as well as an option to acquire a 70% interest in the Hazeur property, at the southern edge of the Monster Lake group of properties.

EXPLORATION TARGETS
The Farellon property, comprising a 100% interest in six claims and the option to earn a 100% interest in two claims, is located 150 km south-west of Copiapo, Chile, and consists of eight mining claims totalling 1 234 ha in the Carrizal Alto mining district, 3 km south-west of the historic Carrizal Alto mine.

In 2014, Red Metal entered into a contract with a Chilean artisanal miner allowing the artisanal miner to mine on the Farellon property in return for a 10% net sales royalty. In January 2015, the artisanal miner first started selling mineralised material to Chilean national mining company ENAMI, and has since sold 9 953 t of sulphide mineralised material grading 1.82% copper, 6.56 g/t silver and 0.25 g/t gold, as well as 1 813 t of oxide mineralised material grading 1.56% copper.

In April 2015, the artisanal miner received all the necessary permits allowing them to increase their operations from 500 t/m to 5 000 t/m. Continued expansion of the Farellon property's small-scale mining operation, through minimal capital expenditures, could significantly increase revenues and provide important geological and metallurgical information, TomaGold advised.

The Perth property consists of 12 mining claims totalling 2 245 ha in the Carrizal Alto mining district. It adjoins the Farellon project but is geologically different. Modern exploration on the property started in 2008 and multiple surface mapping, trenching and drilling programmes have been completed since then, uncovering more than 12 mineralised veins on the property.

The Mateo property is a copper/gold/silver project consisting of 14 mining and exploration claims totalling 1.18 ha located about 10 km east of Vallenar. During August through October 2011, Red Metal carried out an in-depth geological mapping and sampling programme on the property.

A total of 138 reconnaissance samples were collected, with the highest assay values returned being 21 g/t gold and 10.3% copper. However, more common values were between 1 g/t and 3 g/t gold and 1% to 3% copper. Detailed mapping identified nine significant mineralised zones where further work is recommended, the company advised.