Samco Gold Limited (TSXV:SGA) stated that it has signed a binding letter of intent with Pan American Silver Corp. that will grant PAS the exclusive option to acquire a 60 percent interest in the El Dorado- Monserrat project in Santa Cruz, Argentina. Both parties plan to participate in the exploration and development of EDM leading to the commencement of mining activities at El Dorado.
As quoted in the press release:
As preconditions to PAS exercising its Option PAS is to conduct further work, including drilling at EDM equivalent to at least US$2 million, followed by the preparation of a technical report. Upon exercising the Option PAS is to make a one-time payment to the Company of US$5 million. Funding for the development of the project may be provided by PAS up to certain limits and pursuant to certain lending criteria which could have the effect of reducing the Company’s interest in the project to 30%. The intention is for the formation of a jointly owned company (the “Operating Company”) through which to commence mining operations at EDM. Additional dilution may occur after commercial production if a party does not provide its share of ongoing costs. If either party is diluted to less than a 10% interest in the Operating Company that party’s interest will automatically convert to a 2% NSR. PAS will have day-to-day management control of the Operating Company. The letter of intent terminates if a definitive agreement between the parties’ Argentinean subsidiaries has not been entered into by October 1, 2014.
Samco CEO, Charles Koppel, said:
This is an extremely attractive partnership for Samco and confirmation of the significant potential of the El Dorado-Monserrat property. We are looking forward to working with Pan American’s high quality team with the joint intention of bringing the project through to production. In addition, we will not only benefit from their exploration and operational expertise, but also from the synergies with their nearby Manantial Espejo mine.