Mandalay Resources Corp (TSE:MND) had news on its Chilean asset Wednesday as the firm revealed it may have found a buyer for the Cerro Bayo mine.
The company has struck a deal with Equus Mining for an option to buy the mine, which was the scene of a flood back in 2017 after which output was suspended.
The non-binding heads of agreement means Equus can explore at the 29,495-hectare district in Region XI, southern Chile for three years.
If it chooses, Equus can exercise its option to acquire all the issued share capital of subsidiary Compania Minera Cerro Bayo Ldta (CMBC), including its mining properties, resources and mine infrastructure at Cerro Bayo, as well as the 1,500 tpd (tonnes per day) processing plant, which has been on care and maintenance for the last two years.
Output from the mine was suspended from June 9, 2017, when the Delia NW mine part of the site was flooded. A search for two missing miners caused by the flood was called off on June 27.
The precious metals producer declared force majeure in respect of the mine the same month.
If Equus does decide to make the acquisition, then Mandalay will receive 19% of Equus’ share capital, along with a 2.25% net smelter royalty on production once the mine has produced at least 50,000 ounces of gold equivalent, subject to a re-purchase option in favor of Equus.
In addition, Equus will assume 50% of the approved site closure costs at Cerro Bayo.
The deal is conditional on a number of factors, including definitive agreements, third-party consents, and the approval by both companies' boards.
Shares added 3.6% to $$0.14.
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