JOHANNESBURG (miningweekly.com) – ASX-listed Austral Gold would buy fellow listed Troy Resources’ Casposo gold and silver project in Argentina, as part of its strategy to build a South American-focused business.

Austral and Troy on Monday announced the Casposo transaction, which involved Austral acquiring a 51% economic interest in the mine for $3-million.

The company would be entitled to a further 19% interest by paying another $1-million no later than 12 months.

Troy further granted Austral an option to acquire the remaining 30% over a three-year period, from December 2018, for a total consideration of $7-million. Should the silver price be in excess of $16/oz at the time, the exercise price would be increased depending upon the actual silver price at the time.

"Troy has made considerable efforts over the past six months to restructure the operations at Casposo to provide a platform to unlock further value in the mine.

“In partnering with Austral, a company with extensive experience and operating skills in both Argentina and the region, Troy believes it has created a strong foundation to deliver the benefits now being created for the mining industry, by the country’s new government,” Troy MD Martin Purvis noted.

Austral, which would be the appointed manager of the mine, would also provide up to $10-million, pursuant to an initial capital investment plan, to develop and implement a reengineering plan for Casposo with a view to achieving profitable operations within a year, while the company's interest in relation to the capital investment plan would be free carried.

To the extent that Casposo required funding for any other purpose, other than the capital investment plan, the company could either elect to contribute its pro-rata share or have its economic interest diluted.

Austral said in a statement that this strategic acquisition gave it an established asset in Argentina and a foundation in that market to further consolidate its asset base.

“The project represents a unique opportunity for Austral. We are excited to begin the process of leveraging our experienced technical team to transform it into a profitable project, just as we have done with Guanaco in Chile. We have already identified the team to lead the project locally and implement the capital investment plan,” Austral executive director Stabro Kasaneva commented.