PERTH (miningweekly.com) – ASX-listed and TSX-V listed Austral Gold has made moves to acquire TSX-V-listed Revelo Resources Corporation, with the two companies striking a conditional non-binding letter of intent (LoI).

It is proposed the each Revelo shareholder would be given 0.9184 common shares in Austral for each Revelo share held, with Austral to pay an additional C$1.17-million to the Revelo shareholders based on their respective shareholding at the completion date of the transaction.

Following the acquisition, Revelo shareholders would own some 5.9% of the combined entity on an undiluted basis.

The two companies said in a joint statement on Thursday that based on the 30-day volume weighted average trading price of both Revelo and Austral’s share price on the TSX-V prior to the signing of the LoI, the Austral shares being issued represented a 55% premium to the price of Revelo’s stock, and in aggregate of the shares being issued and the cash consideration, represented a 77% premium.

The transaction remains subject to further due diligence, negotiations and the satisfaction of material conditions, such s a definitive agreement.

“We are pleased to make an offer for the acquisition of Revelo as they own seven interesting assets, three of which are precious metals projects located in the Paleocene-Eocene belt, which is in the vicinity of our Guanaco/Amancaya mining complex,” said Austral CEO Stabro Kasaneva.

“In addition, Revelo is pursuing an attractive transaction with West Pacific Ventures Corp, which should result in Revelo owning a 19.9% interest in a new vehicle that will control an interesting set of copper projects in the same area. This transaction would allow us to consolidate our leading role in the Paleocene-Eocene belt in Chile and increase our portfolio of exploration assets.”

Revelo chairperson Michael Winn said that the transaction was attractive to Revelo shareholders, given that Austral was a growing producer of gold and silver, with great upside potential.

“The proposed business combination between Austral’s production and Revelo’s exploration assets, with three of Revelo’s gold/silver exploration projects within easy trucking distance of Austral’s processing plant at Guanaco, make for a compelling story.”

The two companies are now working to complete the due diligence activities and to sign definitive documentation.

The transaction is not expected to require Austral shareholder approval.