Kootenay Silver Options San Diego Project to AuRico Gold

Kootenay Silver Inc. (TSXV:KTN) announced that it’s entered an option agreement via its Mexican subsidiary. The agreement is with a subsidiary of AuRico Gold Inc. (TSX:AUQ), and it will allow the AuRico subsidiary to earn up to a 100-percent interest in Kootenay’s Mexico-based San Diego property.

Further details about the agreement are as follows:

The terms of the agreement allow ODA to earn a 65% interest by spending an aggregate total US$3 million in exploration expenditures over 3 years (by April 8, 2018) and to pay an aggregate total of US$480,000 to MJM byDecember 10, 2017, which will be used by MJM to fulfill commitments related to underlying property payments. ODA will also be responsible for annual Mexican assessment work and mining concession taxes during the term of the agreement.

Upon earning the initial 65% interest, ODA will have the right to acquire a 100% interest by paying US$8.00 per gold or gold equivalent ounce of resource based on the preparation of a National Instrument 43 101 compliant resource statement, which must be completed no later than 90 days after April 8, 2018.  On acquisition by ODA of 100% interest, MJM will receive a 2.5% net smelter royalty.  If ODA decide not to exercise the Second Option in order to acquire the remaining 35%, a one-time cash payment to MJM of US$250,000 becomes payable and a joint venture will be formed to further develop the project.

As quoted in the press release:

The San Diego project, is located about 38 kilometers northwest of AuRico’s El Chanate Gold Mine and sits within the Sonora-Mojave Megashear, which hosts numerous operating gold deposits including Chanate, Herradura, Mesquite and San Francisco.  The San Diego project target potential is an open pit gold deposit much of which projects under a large pediment covered area at the intersection of low and high angle faults and the hosting silicified meta-rhyolites.

Previous work conducted shows anomalous gold mineralization is found along a 3 kilometer long trend focused in silicified meta-rhyolites associated with an intersecting low angle east-northeast trending fault cut by high angle north-northwest trending faults. Gold mineralization is strata bound at the base of the meta-rhyolites at the fault contact with underlying meta sediments.

Sampling conducted by Kootenay encountered gold values ranging from back ground up to 12.2 gpt gold in a mix of grab and chip samples. Silver values are also anomalous along with copper and lead.  Alteration associated with gold mineralization consists of silicification, quartz veins and iron carbonate veining.

James McDonald, president and CEO of Kootenay, commented:

We are excited to have AuRico as a partner exploring the San Diego property. The deal structure spreads project risk and allows consolidation of ownership while giving Kootenay shareholders upside in a buyout and royalty structure.

Click here to read the full Kootenay Silver Inc. (TSXV:KTN) press release.