Minera Alamos Inc (CVE:MAI), the Mexico-focused metals explorer, unveiled a deal with ePower Metals Inc, which will see it own 19.8% of the latter's shares, allowing it to accelerate development of the De Los Reyes gold project.
Minera currently has the right to acquire a 100% interest in the project in Mexico following an option agreement entered into with Vista Gold Corp.
The firm is developing the Santana project in Sonora state, while the La Fortuna and Guadalupe De Los Reyes properties are in Durango state. Santana is the group's "near term production opportunity" and has seen a successful bulk test mining program.
At La Fortuna, a preliminary economic assessment (PEA) released last August demonstrated robust project economics.
"Los Reyes was identified as a third potential operation in our evolving development plans for the company and the transaction with ePower is an excellent opportunity to ensure that additional value is unlocked for the company's shareholders...," said Darren Koningen, CEO of Minera Alamos in a statement.
"We continue to evaluate further opportunities to expand our interests in the immediate vicinity of our highly prospective Santana and La Fortuna projects as we approach construction decisions at both sites."
Koningen added that the ePower agreement supported its aim of building a mid-tier gold producer through a pipeline of late stage, low capex assets that can be put quickly into production expanded from free cash flow.
"Following recent exploration and permitting successes at Santana and La Fortuna (both 100% owned), the new arrangement allows our technical team to focus in the coming year on accelerating the next phases of exploration at Santana in addition to the final activities necessary for the construction of a low capex heap leach gold operation, while concurrently advancing plans for a second high margin open pit milling operation at La Fortuna."
Under the terms of the deal, Minera Alamos will assign its option rights to acquire the Guadalupe de los Reyes gold project in exchange for around 19.8% of the outstanding ePower shares.
Minera has various rights, including that should ePower fail to complete any of the remaining Los Reyes option payments all rights to acquire the project will revert to the company.
Minera Alamos also has the right to appoint one director to the ePower board for so long as Minera Alamos holds at least 5% of ePower shares.
Upon entering a definitive deal, ePower is required to advance US$1.5 million to Minera Alamos as a deposit to secure the April payment.
In order to fund that deposit, ePower has arranged a loan of C$2 million to be deposited into escrow at the time of execution of the LOI (letter of intent) by a group of arm's length lenders. The loan funds are to be released to Minera Alamos upon execution of a definitive agreement for the transaction.
Completion of the transaction is subject to a number of conditions, including ePower completing a financing of at least C$6 million, a share consolidation on a 2:1 basis, and completing satisfactory due diligence.
Minera Alamos shares were unchanged at $0.11.
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