PERTH (miningweekly.com) – ASX-listed Australia Gold has struck a deal with fellow-listed E2 Metals to divest of its Pinguino project, in Argentina.
Under the terms of the agreement, Australia will receive $5-million in cash, of which $2.5-million will be paid on closing of the transaction and the remaining balance in three yearly instalments.
The company will also be issued with shares equating to a 19.99% shareholding in E2, on a non-diluted basis, all of which will be held in escrow and with the first 50% of the shares to be released on the first anniversary of the transaction, and the balance on the second anniversary.
Austral will also be granted 15-million options in E2, with an exercise price of 26c each and a three-year exercise date, with the options only exercisable if Austral maintains a 19.99% interest in E2. The value of the options has been calculated at $0.6-million.
Additionally, Austral will retain its option to purchase either all or half of the existing 2% net smelter return royalty on the Pinguino project and will have the right to appoint one person to the E2 board.
“We firmly believe in the Pinguino project. This transaction with E2 Metals will enable us to share in the project’s potential upside and use the proceeds from the sale to fund our exploration activities in Argentina and Chile. In addition, E2 Metals’ flagship Conserrat project is close to Pinguino and upon completion, we will become the largest shareholder in an ASX-listed company, with a sound shareholder base and strong position in the mining-friendly Argentine province of Santa Cruz,” said Austral CEO Stabro Kasaneva.
“We will also retain our 51% interest and option to acquire an additional 49% interest in the Sierra Blanca project, which is adjacent to the Pinguino project.”
The transaction is subject to a number of conditions, including E2 shareholder approval and regulatory approval.
E2 chairperson Peter Mullens told shareholders on Friday that this would be a transformational transaction for the company, consolidating two large silver and gold vein districts under one company, forming an emerging pure play silver company on the ASX.
“The acquisition has strong rationale for both parties, and is expected to provide E2 an accelerated pathway to critical mass and resource development, while Austral retains 19.9% participation in the consolidated portfolio, leaving Austral to focus on its core mining operations in Chile and Argentina, and its interest in the United States (Nevada and Utah),” he added.
MD Todd Williams added that the transaction was a watershed moment for E2 that had been several months in the making.
“The consolidation of Pingüino and Conserrat creates a single company with the largest undeveloped silver resource in Santa Cruz, and new and evolving high-grade discoveries with a commanding landholding by a junior in the prolific Cerro Vanguardia district. Shortly after closing the transaction, E2 intends to publish an updated mineral resource estimate for Pingüino in accordance with Joint Ore Reserves Committee compliance and define plans for resource expansion and vein discoveries. The company remains in a strong financial position and will fund the upfront cash payment from the company’s current cash reserves.”