Shares in Canada-based junior Silver Dollar Resources surged 32% on Friday, after the company announced a letter of intent (LoI) to acquire First Majestic Silver’s La Joya silver/copper/gold project, in Durango, Mexico.
CSE-listed Silver Dollar has the option to earn an initial 80% interest following the exercise of which it may earn an additional 20% for an aggregate 100% interest in the La Joya property, which consists of 15 mineral concessions totalling 4 646 ha.
"La Joya is an advanced exploration and development stage project that will provide our shareholders with tremendous leverage in a rising metals market," said Silver Dollar president Mike Romanik.
"The property's regional targets are of particular interest as they have never been followed up and their exploration potential remains untapped. The transaction also gives us an opportunity to work with First Majestic, one of the largest silver producers in Mexico."
Under the terms of the LOI, Silver Dollar and First Majestic will negotiate a definitive agreement within the next 60 days. To exercise its first option and acquire an 80% interest in the La Joya property, Silver Dollar will pay First Majestic $1.3-million cash over four years, issue shares equal to 19.9% of Silver Dollar's then-outstanding common shares within one year, incur $1-million of exploration expenditures within the first five years, and grant First Majestic a 2% net smelter returns royalty.
If Silver Dollar incurs the exploration expenditures within the first three years; however, First Majestic will waive the remaining $600 000 - or nearly half - of the cash option payments.
Silver Dollar may exercise its second option and acquire the remaining 20% of the La Joya property by providing notice to First Majestic within 30 days of earning the first 80% interest and issuing to First Majestic additional shares equal to 5% of Silver Dollar's then-outstanding common shares within five years. If Silver Dollar does not provide such notice, Silver Dollar and First Majestic will enter into a joint venture.
Silver Dollar touched a new 52-week high of C$0.45 a share on Friday and closed at C$0.41 a share.
and hosts the Main Mineralized Trend (MMT), Santo Nino and Coloradito deposits (see Figure 2).