Canada-based Gran Colombia Gold said on Tuesday that it had advanced the previously mooted plan to spin off its Venezuela assets into a separately listed vehicle.

The company, which trades on the TSX, said that it had entered into a letter of intent with TSX-V-listed Western Atlas Resources outlining the terms on which it intended to spin off its Venezuelan assets in exchange for $20-million in common shares.

Gran Colombia would also acquire up to a 19.9% equity interest in Western Atlas by way of a C$1.4-million subscription into Western Atlas’ proposed private placement.

“As we said earlier this year, we are incredibly excited with the future prospects of Venezuela and are eager to be a partner in the reconstruction of the country. We also indicated that we would spin off our Venezuelan assets into a separate listed vehicle for the purposes of holding, developing and financing these assets and carrying out our Venezuelan investment strategy. In Western Atlas, not only have we found a partner with a similar passion for the longer term strategy in Venezuela, but their Canadian project provides us with an opportunity to enhance the value of our investment as they carry out their exploration programme,” explained Gran Colombia executive chairperson Serafino Iacono.

Western Atlas owns the Meadowbank project, in Nunavut, located immediately adjacent to Canadian major Agnico Eagle’s Meadowbank producing gold mine.

Iacono currently serves as nonexecutive chairperson and beneficially owns/controls about 21% of the outstanding shares of Western Atlas.

Western Atlas’ private placement seeks to raise gross proceeds of between C$3-million and C$5-million in a mix of flow-through units and non-flow through units at a price of C$0.10 a flow-through unit and C$0.085 a non-flow through unit.

Proceeds from the placement will be used for the drilling programme at the Meadowbank project, seeking restitution of the Increible project, in Venezuela, and general and administrative expenses.

Gran Colombia and Western Atlas will enter into definitive agreements with respect to the private placement and the Increible transaction following completion of satisfactory due diligence by the parties.

The closing of the private placement is expected to take place as soon as reasonably practicable following the execution and delivery of the subscription agreement.

The letter of intent contemplates that upon closing of the private placement, Gran Colombia vice chairperson Miguel de la Campa will be appointed to the board of Western Atlas, and that Gran Colombia will also be entitled to appoint one additional member to the board of Western Atlas at its next annual general meeting.

Gran Colombia's primary focus is in Colombia, where it is currently the largest underground gold and silver producer, with several mines in operation at its Segovia and Marmato Operations.