Gold major Barrick Gold has acquired an option to earn a 70% interest in the El Quevar project, Argentina, Colorado-based precious metals exploration and development company Golden Minerals announced on Monday.
Barrick will purchase $1-million of Golden Minerals shares pursuant to a private placement transaction at $0.21 a share.
In order to earn an undivided 70% interest in the El Quevar project, Barrick has to spend $10-million on exploration, deliver a National Instrument 43-101-compliant prefeasibility study describing a potentially profitable operation with mineral resources of not less than two-million gold equivalent ounces, and deliver a written notice of exercise to Golden within eight years.
“We are very pleased to have Barrick as a partner in this exploration agreement. Barrick’s interest in exploring the El Quevar district underscores, as we have long maintained, the excellent potential of the high sulphidation epithermal systems at El Quevar to host additional important discoveries. Barrick has a long history of success in discovering, developing and mining world-class gold deposits in the Andes and elsewhere. This agreement sets a reasonable base value on our existing asset and allows for substantial upside if Barrick is successful in its exploration efforts at El Quevar,” said Golden president and CEO Warren Rehn.
Golden will form a new entity (NewCo) that will hold the El Quevar properties. Upon earn-in by Barrick, the NewCo will be 70% owned by Barrick and 30% owned by Golden. Funding of NewCo will be split in proportion to ownership of each shareholder, and industry standard dilution mechanisms will apply in the case of funding shortfalls by either shareholder.
Dilution below 10% interest will result in conversion to a 1.5% net smelter royalty (NSR) applicable to all recovered products, excluding silver during the term of the silver royalty. Golden will retain a 5% NSR silver royalty payable on the recovered silver from production from the project, capped at the 29-million total payable silver ounces as estimated in Golden Minerals’ 2018 preliminary economic assessment.
Barrick owns the Veladero mine, in San Juan province, in Argentina. The group last year renewed its commitment to Latin American countries.