TORONTO (miningweekly.com) – TSX-V-listed Samco Gold's Argentinean subsidiary has executed a definitive option agreement with Pan American Silver (PAS), giving PAS the exclusive option to acquire a 60% interest in the El Dorado-Monserrat (EDM) project, in Santa Cruz, Argentina.
A statement released on Monday explained that under the option agreement, PAS had the exclusive option to acquire a 60% interest in the EDM project, while both parties planned to participate in the exploration and development of the project up to first production.
Under the agreement, PAS would need to conduct further work, including drilling at EDM equivalent to at least $2-million, followed by the preparation of a technical report in the form of a prefeasibility study. When exercising its option, PAS would need to make a one-time payment to Samco of $5-million.
Funding the development of the project could be provided by PAS up to certain limits and under certain lending criteria, which may reduce Samco’s carried interest in the project to 30%.
The intention was to form a jointly-owned company through which mining would be started at EDM. Further dilution could take place after commercial production had been declared, should a party not provide its share of ongoing costs. If either party was diluted to less than a 10% interest in the operating company, that party’s interest would automatically convert to a 2% net smelter royalty.
PAS would handle the day-to-day management of the operating company.
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 previous exploration campaigns over the past 20 years, including some 20 000 m of drilling and more than 60 km of trenching.