Minerals explorer G Mining Ventures (GMIN) on Monday announced that it would buy the Tocantinzinho project, an openpit gold deposit containing 1.8-million ounces of gold reserves in northern Brazil.

The company would buy the asset from Eldorado Gold in an arm’s length acquisition, following which the Toronto-listed gold miner would become a 19.9% shareholder in GMIN.

GMIN president and CEO Louis-Pierre Gignac said that Tocantinzinho had all the key attributes that the company was looking for in an initial acquisition, with clear visibility towards near-term construction and commercial production.

“This is the first step towards our vision of becoming a leading intermediate gold producer. With over C$40-million of cash on the balance sheet, and additional access to $200-million from Sprott, we are well positioned to advance our ‘buy, build, operate’ strategy that includes the acquisition of additional advanced-stage development projects and operating mines. We look forward to having Eldorado as a cornerstone investor and appreciate their confidence in our ability to create and unlock value by carrying out the next phases of the project,” he stated.

Eldorado acquired Tocantinzinho in 2010 through the $120-million acquisition of Brazauro Resources and has invested more than $90-million into the project since then.

In 2019, Eldorado announced a feasibility study, which showed good economics with an aftertax net present value, using a 5% discount, of $409-million and an aftertax internal rate of return of 19.7%.

GMIN said it would prepare an updated feasibility study in the next 180 days.

GMIN would buy the project for $50-million upfront and a $6-million deferred consideration.

Eldorado CEO George Burns commented that the transaction provided Eldorado with immediate value for Tocantinzinho, while also retaining meaningful exposure to future value creation through its equity stake in GMIN.

“Tocantinzinho will be a cornerstone asset for GMIN, a team with a strong track record of building mines on time and on budget. Together with our local Brazilian team, we believe they are the right group to responsibly advance the asset and we look forward to following and supporting their success. On behalf of the management team and company, I would like to take this opportunity to thank Lincoln Silva and his team in Brazil for all their contributions, hard work and dedication to the company. We wish them all the best moving forward.”